a note on the tullock dissipation rate abstract we show among other results that the tullock dissipation rate at a symmetric nash equilibrium under risk aversion approaches the risk neutral rate as rent size becomes small under quadratic risk averse utility the risk neutral rate applies under duopoly regardless of rent size under constant absolute risk aversion the rate rises with rent size

varying the intensity of competition in a multiple prize rent seeking experiment we experimentally test a rent seeking model under five levels of competition at one extreme a subject s probability of winning a prize is equal to her share of the total expenditures at lower levels of competition a subject s probability of winning is affected more by her own expenditures than by the expenditures of others predicted expenditure levels are positively associated with higher levels of competition consistent with previous rent seeking experiments we find that subjects spend significantly more than the nash equilibrium prediction at all levels of competition however expenditure patterns generally follow the nash prediction expenditures decrease as the level of competition decreases our experimental design also includes a lottery choice experiment to control for subjects risk preference we find that subjects who are more risk averse spend significantly less in the contest and this effect is particularly strong for female subjects

do too many cooks always spoil the stew an experimental analysis of rent seeking and the role of a strategic buyer laboratory methods are used to evaluate the effects of institutional arrangements and rent defending activity on rent seeking auction outcomes in part nash equilibrium predictions are a useful behavioral guide as predicted more rents are dissipated in perfectly discriminating auctions where the high bidder wins than in lotteries where relative bids determine the chance of winning also as predicted the introduction of a rent defending buyer reduces social costs nevertheless the social costs of rent seeking consistently exceed predicted levels moreover individual bidding especially by buyers deviates markedly from nash predictions

preemptive rent seeking and the social cost of monopoly power abstract monopoly power evokes rent seeking aimed at supplanting an incumbent monopolist as well as preemptive rent seeking by incumbents concerned with deterring entry of potential competitors using an illustrative example where preemptive rent seeking takes the form of excess capacity this note makes the point that the relation between the value of resources expended in the two types of rent seeking activity determines whether exposure of an incumbent monopolist to the discipline of potential competition reduces the social cost of monopoly power

rent seeking contests with incomplete information we consider rent seeking contests with two players who each have private information about their own cost of effort we consider both discrete and continuous distributions of costs and give results for each case focusing on existence of equilibrium

winner take all and proportional prize contests theory and experimental results abstract this study provides a unified framework to compare three canonical types of contests winner take all contests won by the best performer winner take all lotteries where probability of success is proportional to performance and proportional prize contests in which rewards are shared in proportion to performance we derive equilibria and observe outcomes from each contest in a laboratory experiment equilibrium and observed efforts are highest in winner take all contests lotteries and proportional prize contests have the same nash equilibrium but empirically lotteries induce higher efforts and lower more unequal payoffs behavioral deviations from theoretical benchmarks in different contests are caused by the same underlying attributes such as risk aversion and the utility of winning finally we find that subjects exhibit consistent behavior across different types of contests with subjects exerting higher effort in one contest also exerting higher effort in another contest

rent seeking in general equilibrium a didactic illustration in the first part of the paper a simple general equilibrium model is developed which allows a graphic illustration of some of the basic ideas in rent seeking literature general equilibrium means that the alternative uses of available resources for both consumers and producers are made explicit the standard partial analysis of rent seeking is re interpreted in a general welfare theoretic framework thereby clarifying such diverse terms as consumer and producer surplus profits and rents to be captured the initial models of tullock and krueger are used to describe the social harm done by rent seeking activities in terms of a social cost benefit calculus

rent seeking and the provision of public goods in this short paper i adopt the public choice school paradigm of modeling a government in order to compare its performance with that of the market in the standard model of the provision of public goods private provision is represented by the cournot nash equilibrium in individual contributions public provision incorporates rent seeking whereby some of the aspects of the allocation are determined indirectly by influence activities of the interested parties thus both allocation procedures yield inefficiency and the question is which procedure results in a greater amount of inefficiency private provision with its free riding incentives or public provision with its rent seeking incentives the results indicate that public provision may well be preferred to private provision of public goods thus superiority of private provision is not guaranteed even in the case of a non benevolent government copyright 1993 by royal economic society

contests as selection mechanisms the impact of risk aversion abstract we investigate how individual risk preferences affect the likelihood of selecting the more able contestant within a two player tullock contest our theoretical model yields two main predictions first an increase in the risk aversion of a player worsens her odds unless she already has a sufficiently large advantage second if the prize money is sufficiently large a less able but less risk averse contestant can achieve an equal or even higher probability of winning than a more able but more risk averse opponent in a laboratory experiment we confirm both the non monotonic impact and the compensating effect of risk aversion on winning probabilities our results suggest a novel explanation for the gender gap and the optimality of limited monetary incentives in selection contests

a multi winner nested rent seeking contest this paper considers a symmetric imperfectly discriminating rent seeking contest in which there may be several winners we first demonstrate a serious flaw in previous work and then go on to suggest an alternative method for analyzing the contest in contrast to the previous work we show that the value of the rent is fully dissipated in equilibrium as the number of players becomes large

parametric efficiency tests economies of scale and input demand in u s electric power generation duality theory has been applied increasingly in recent years to study the structure of production a major advantage of using duality theory is that systems of input demand equations can be derived by simple differentiation facilitating the use of flexible functional forms also use of duality theory makes it possible to choose a representation of the technology which has desirable properties for estimation such as exogeneity of the regressors however the use of a dual representation of production structure is appropriate only if the corresponding maintained hypothesis concerning economic behavior e g cost minimization or profit maximization is valid the perceived advantages of the dual approach to studying production structure have led to some applications in which the maintained hypothesis concerning economic behavior is unlikely to be appropriate for example neoclassical cost functions have been used to study the characteristics of production in regulated industries despite an extensive theoretical literature indicating that a profit maximizing regulated firm would not minimize costs subject to market prices 2 in this paper we propose a generalized cost function that retains the principal advantages of the neoclassical cost function but does not require that cost minimization subject to market prices be imposed as a maintained hypothesis in our model firms are assumed to base their production decisions on unobservable shadow prices which reflect the effects of regulation on the effective prices of inputs parametric tests for cost minimization are obtained by expressing shadow prices as functions of market prices the generalized cost function is estimated with data for regulated electric utilities the parametric restrictions corresponding to cost minimizing behavior subject to market prices are rejected implying that the use of a neoclassical cost function is not appropriate in this application 3

gordon tullock and experimental economics gordon tullock s research has substantially influenced the development of economic science in general and experimental economics in particular we present the first comprehensive survey of this significant achievement we show how tullock s research in bioeconomics influenced later developments in neuroeconomics and how his pioneering work on rent seeking generated a literature of laboratory tests of his hypothesis we also describe tullock s own experiments and draw attention to his early insights on trust games

some results on rent seeking contests with shortlisting we show that rent seeking contests with shortlistinghave comparative static properties which depend on thestage of the contest by generalising the argument inamegashie 1997 we show that well known comparativestatic results in single stage rent seeking contestsdo not necessarily carry over to contests withshortlisting the analysis suggeststhat policy prescriptions for reducing rent seekingexpenditures in contests with shortlisting cannot begiven without taking into account the stage of thecontest we also extend the model in amegashie 1997 to the case of unequal class sizes finally theshortlisting method in amegashie 1997 is comparedwith that in clark and riis 1996

dissipation of contestable rents by small numbers of contenders the theory of rent seeking with its origins in the observations of gordon tullock 1967 or to use jagdish bhagwati s 1982 proposed term the theory of directly unproductive profit seeking activities is concerned with the potentially adverse effects on resource allocation of incentives to cap ture and defend artificially contrived rents and transfers the scope for so cial loss proposed by the theory derives from the relation between the value of a contestable prize and the value of the resources attracted into the con test to determine the beneficiary of the prize underlying this social loss is a specification of how rational behavior by optimizing agents links the value of the prize sought to the resources expended it has been traditional to assume competitive behavior in describing the activities of lobbying and influence seeking then if some further condi tions are satisfied l the total value of the resources expended precisely equals the value of the prize sought so dissipation is complete 2 conse quently the social cost associated with contestability of a rent can be in ferred from the value of the rent itself and the detailed and hard to come by information on individual outlays made in the course of the contest be comes unnecessary by basing their analyses on competitive dissipation contributors to the rent seeking literature see the review by robert tollison 1982 have been able to presume that the observed value of a contested rent is an exact measure of the associated social cost of monopoly power or regu lation similarly in the trade theoretic literature where the rights contested are to quota premia or revenues from trade taxes krueger 1974 bhagwati

free entry and efficient rent seeking this paper concerns rent seeking and the extent to which rents are dissipated under various circumstances gordon tullock s 1967 insight that expenditures made to capture an artificially created transfer represent a social waste suggested that the cost to the economy of monopoly and regulation is greater than the simple harberger 1954 deadweight loss indeed under tullock s original formulation and in the extensions of his work by krueger 1974 and posner 1975 rents are exactly dissipated at the social level 1 is spent to capture 1 so that the total welfare loss from such activities is equal to the harberger triangle plus the rectangle of monopoly profits

two stage team rent seeking experimental analysis this paper presents a two stage team rent seeking model with a contest prize that is not excludable among winning team members when early effort is a perfect substitute for late effort early actors can free ride on their late moving teammates however when early and late efforts are complements all team members exert positive effort levels asymmetries in early effort reduce effort choices for all late movers the theory is tested with laboratory experimental methods although subjects overinvest relative to the nash equilibrium in all treatments chosen effort levels provide limited support for the model early movers exerted higher effort in the complement treatment and second stage effort choices were broadly consistent with best response functions surprisingly in both single shot and repeated play environments early movers in the substitute treatment did not free ride choosing effort levels similar to those of late movers

the dependence of parametric efficiency tests on measures of the price of capital and capital stock for electric utilities this study tests whether various measures of the price of capital and capital stock will influence estimates of electric utility allocative efficiency parametric shadow values are estimated for fuel and capital prices and these values are tested against the hypothesis they are equal to unity the theoretically correct jorgenson type price for capital services results in rejecting the inefficiency hypothesis while a more simplified version of this price does not reject the efficiency hypothesis the exact measure of opportunity cost of capital discounted cash flow or capital asset price does not influence the efficiency conclusions copyright 1989 by blackwell publishing ltd

incremental protection and efficient political choice between tariffs and quotas this paper offers a new political economy explanation for the increasing use in recent years of quotas instead of or in combination with tariffs as a form of trade protection we show that under domestic monopoly the comparative efficiency of tariffs and quotas in achieving political objectives will vary depending on the nature of the mark et and the level of protection at high levels of protection quotas can become more politically efficient than tariffs we also show that at low levels of protection a price equivalent quota may not exist

rent seeking and entry abstract it is the purpose of this paper to develop a market equilibrium model of rent seeking with entry the model determines the optimal amount of rent seeking activities by individuals the equilibrium number of rent seekers and hence also the total amount of rent seeking in the industry

transfer seeking and avoidance on the full social costs of rent seeking we would like to thank gordon tullock and an anonymous referee of this journal for their helpful comments and suggestions this abstract was borrowed from another version of this item

the design of rent seeking competitions in the standard tullock model of rent seeking as a noncooperative game aggregate expenditures by seekers can equal exceed or fall short of total rents depending on what is assumed about the number of seekers and the marginal return to a seeker s investment if the supply of an input into the rent seeking process is controlled by a politician who receives payment from seekers for it the indeterminacy of the process becomes a less serious problem he supplies it and designs the rent seeking game to maximize his wealth the author derives expressions for the number of seekers and the marginal return parameter which maximize the politician s wealth in one input and two input rent seeking processes

corruption and rent seeking the rent seeking theory was one of thefirst economic instruments developed tomodel corruption in the public sector comparing corruption with lobbying itproposes that the former is the lesser oftwo evils since lobbying entails the wastage of resources inthe competition forpreferential treatment this study showsthat the traditional rent seeking theorymisunderstands three factors first theimpact of a corrupt monopoly on the rent ssize second corruption as a motivationfor supplying preferential treatment andthird that corruption involves a narrowerrange of interests than those ofcompetitive lobbying taking these factorsinto consideration the opposite argumentis valid corruption has worse welfareimplications than alternative rent seekingactivities

endogenous sharing rules in collective group rent seeking this paper examines the possibility of endogenous determination of intra group sharing rules in a collective group rent seeking game collective group rent seeking is considered as a two stage nash cournot game in which sharing rules are determined prior to individual decision on voluntary contribution the solution is subgame perfect and is obtained by backward induction in competition between two groups of the same size the nash equilibrium sharing rule of each group is to distribute rent to each according to relative effort total rent seeking outlays in this case are equal to those obtained by tullock 1980 when more than two groups compete for a rent the sharing rule based on relative effort is again likely to be the nash equilibrium strategy of each group the amount of total rent seeking outlays is also equal to that in tullock 1980 in a nutshell the rent is substantially dissipated if sharing rules are endogenously determined

overbidding and overspreading in rent seeking experiments cost structure and prize allocation rules we study experimentally the effects of cost structure and prize allocation rules on the performance of rent seeking contests most previous studies use a lottery prize rule and linear cost and find both overbidding relative to the nash equilibrium prediction and significant variation of efforts which we term overspreading we investigate the effects of allocating the prize by a lottery versus sharing it proportionally and of convex versus linear costs of effort while holding fixed the nash equilibrium prediction for effort we find the share rule results in average effort closer to the nash prediction and lower variation of effort combining the share rule with a convex cost function further enhances these results we can explain a significant amount of non equilibrium behavior by features of the experimental design these results contribute towards design guidelines for contests based on behavioral principles that take into account implementation features of a contest

on the social costs of rent seeking versus the social costs of production flexibility in this paper an analysis is provided of two alternative methods of defensive behaviour by a firm first rent seeking and second potential adjustment by way of investing in product flexibility from the analysis it emerges that at times rent seeking may be socially superior less socially wasteful to other more traditional means of responding to threats this paper therefore suggests that in circumstances where some type of defensive or aggressive activity by firms is available rent seeking while constituting gross social waste may be a net social gain given the alternative options available to the firm

domestic politics foreign interests and international trade policy reply this paper incorporates the foreign interest in the determination of a country s international trade policy into a model of political competition between candidates contesting elective office we envisage foreign and domestic producer interests as expressing political support for a candidate via campaign contributions and candidates as making trade policy pronouncements to maximize political support from producer interests tariffs are divisive but vers are consistent with conciliatory policy positions yielding mutual gain to foreign and domestic interests no candidate has an interest in formulating a trade policy position using a tariff if a ver is a policy option protection in the developed countries has in recent years often taken the form of bilaterally negotiated voluntary export restraints vers rather than the more traditional unilaterally imposed import restrictions the use of voluntary export restraints has been paralleled by interest in the theoretical literature the effects of vers have been compared with tariffs and quotas and vers have been examined in a political economy framework with a view to identifying the gainers and losers from this form of restric

risk sharing vs incentives contract design under two sided heterogeneity we study the matching patterns between heterogeneous principals and agents in a principal agent model the resulting equilibrium relationship between risk and incentives could be negative positive or u shaped these results may provide an explanation for the absence of systematic empirical support for the standard risk model d 2005 elsevier b v all rights reserved

directly unproductive profit seeking dup activities this paper propses directly unproductive profit seeking dup activities as a general concept that embraces a wide range of recently analyzed economic activities including the subset of rent seeking activities considered by krueger it then proceeds to provide a synthesis and generalization of the welfare theoretic analysis of such activities by developing a fourfold categorization of cases depending on the levels of distortions before and after the dup activity thus a unification and overview of the subject are achieved

collective rent dissipation the theory of rent seeking was initiated by tullock 1967 1980 followed by krueger 1974 and posner 1975 and more recently extended in various directions by allard 1988 appelbaum and katz 1986a b c gradstein and nitzan 1989 hillman and katz 1984 1987 hillman and samet 1987 hillman and riley 1989 katz et al 1990 long and vousden 1987 ursprung 1990 and varian 1989 the purpose of this paper is to extend this theory by introducing the possibility of collective group rent seeking with voluntary individual decisions regarding their extent of participation in the collective rent seeking efforts

risk averse rent seeking with shared rents this paper presents a nash equilibrium model of rent seeking behavior in which risk averse players expend resources to obtain a share of a rent as for example in contests for import quota licences results are obtained relating the equilibrium level of lobbying effort by each player to the value of the rent in particular reduced individual lobbying effort is associated with higher rents contested if players are sufficiently risk averse the question of whether the value of rents is a good measure of the resource cost of rent seeking is also considered a simple approximation involving risk and risk aversion parameters is derived for the proportion of rents dissipated in long run equilibrium risk and risk aversion are seen to reduce the rent dissipation ratio below unity copyright 1987 by royal economic society

monopoly price discrimination and rent seeking this paper considers the effect of rent seeking on the welfare implications of price discrimination by a monopolist it is shown that even when rent seeking fully dissipates monopoly profits it is possible for price discrimination to raise social welfare thus the recognition that monopoly profits attract resource using socially wasteful activities does not necessarily negate price discrimination as a defence of monopoly

seeking rents by setting rents the political economy of rent seeking in recent years there has been a large number of papers on the subject of rent seeking most such works on rent seeking have taken the rent as exogenously determined by regulators regulators howeve r may also be expected and indeed have been shown to be rent seeke rs and hence the determination of the rent itself should be endogeniz ed to reflect the fact that the rent setters are themselves rent se ekers in this paper the authors do this by presenting an analysis o f the interaction of regulators firms and consumers within a rent s eeking framework where all three groups are assumed to be self motiva ted the analysis is carried out under alternative assumptions regard ing the nature of the market and the reaction functions of the partic ipants policy implications are drawn where appropriate copyright 1987 by royal economic society

a democratic model of the rent sought benefit cycle assume that an individual or a group has secured a rent sought benefit or transfer from the bureaucracy assume further that this benefit is not like a monopoly right which in the nature of things cannot be replicated but is like a transfer payment or a tax exemption which in principle others might be lucky enough to receive how might the rest of the community react to the benefit received by the successful rent seekers if for example the rent sought benefit is financed by higher taxes that fall on the community as a whole the remainder i e that part of the community that did not receive the benefit will be forced to transfer resources to the benefit recipients one possible response is for the remainder to engage in rent seeking in an attempt to secure the benefit that is currently enjoyed by the recipients we shall refer to this as the bandwaggon option since the remainder tries to jump on the bandwaggon of bureaucratic largesse the other possible response is the protest option according to which the remainder objects to the unfairness of the benefit concession and takes action to prevent the few from benefiting at the expense of the many in this paper we discuss the factors that are likely to influence the choice between the bandwaggon and protest options in doing so we explain why it might be that society sometimes protests at the arbitrary concession of benefits while at other times it tacitly or even actively condones them we also explain why the concession of benefits might spread and correspondingly why the bureaucracy and taxation might grow over time following on from this we consider at what point if any the spread of benefits will cease because society prefers a reform that at once will curtail benefits and reduce taxes finally we consider the conditions under which this cycle of rent sought benefits might be repeated the model that is proposed has two central characteristics first democratic behaviour is assumed if a majority of the public wishes to put an end to the

complete rent dissipation when the number of rent seekers is uncertain the focal question in the theory of rent seeking is the extent of rent dissipation as the indicator of social loss in general rent seeking models assume that the number of contenders in a rent seeking contest is known with certainty but given the hidden nature of rent seeking participants in rent seeking more usually can be expected to face an uncertain number of rivals we show that in a tullock contest with a stochastic number of participants complete ex ante rent dissipation is consistent with a pure strategy nash equilibrium this contrasts with but complements previous results of under dissipation when the number of rent seekers is uncertain our complete dissipation result expands the range of circumstances consistent with association of an observed rent with social loss

the bias in favor of pro tariff lobbies abstract we show that the probability of success of the pro tariff lobby defined as a decreasing function of the ratio of consumer loss to producer gain rent generated by the tariff rises with the tariff under very general conditions this appears as an exception to becker s view that less distortionary measures tend to be adopted over their more distortionary counterparts we then provide a micro foundation for our probability definition using the imperfectly discriminating lobbying framework

a generalized model of rent seeking behavior in this paper i present a formal analysis of rent seeking games in which the players valuations for the prize are represented as vectors the players in this game are risk neutral and may not be indifferent to who wins the contestable rent if it is someone else both tullock s original rent seeking model and the public goods rent seeking model by katz et al turn out to be special cases of this more general model

profit productivity and price differential an international performance comparison of the natural gas transportation industry the objective of this paper is to evaluate the performance of natural gas transportation utilities focusing on the three key strategic performance measures of profit productivity and price differential we propose a methodology that expresses the three performance measures in a unified single equation using the edgeworth index the proposed methodology is applied to an international comparison of the performance of 28 natural gas transportation utilities operating in eight countries in which the business environments differ greatly the empirical results show the possible causes of performance differences and may shed some light on the direction of regulatory policy especially for developing countries that have relatively short histories in the natural gas industry such as korea

rent seeking with uncertain opposition abstract it is observed that sometimes dispersed interests are passive to rent seeking by concentrated interests and that sometimes they provide rigorous opposition this paper assumes that opposing political activism is triggered when rents accruing to concentrated interests exceed a threshold level unknown to the latter in these conditions rents will increase asymptotically to a level less than the trigger level the threat of opposition means that social costs of rent seeking may be less than found by static analysis under certainty the model may be applicable to certain types of regulation such as taxi licensing or pollution control

the olson ratio and indirectly endogenous rent we consider an economy where the rent value depends indirectly on value adding investment of agents thus indirectly endogenous and the win probability is a function of rent seeking spending we introduce the olson ratio characterize it at symmetric cournot nash equilibrium of a perfectly discriminating contest and relate it to the tullock dissipation rate we investigate the possibility of black holes

best of three contest experiments strategic versus psychological momentum abstract we conduct an experimental analysis of a best of three tullock contest intermediate prizes lead to higher efforts while increasing the role of luck as opposed to effort leads to lower efforts both intermediate prizes and luck reduce the probability of the contest ending in two rounds the patterns of players efforts and the probability that a contest ends in two rounds are consistent with strategic momentum i e a momentum generated due to strategic incentives inherent in the contest we do not find evidence for psychological momentum i e a momentum which emerges when winning affects players confidence similar to the previous studies of contests we find significantly higher efforts than predicted and strong heterogeneity in effort between the subjects

would you trust lobbies we consider the regulatory problem to approve or to ban a new product technology in the context of scientific controversy about its detrimental environmental and or health effects we formalize the regulator s decision making process as a tullock contest towards a theory of the rent seeking society texas a m university press texas 1980 the contestants being an industrial lobby representing the economic agents who have developed the new product technology and an environmental lobby representing the economic agents who will be harmed by the product or technology assuming that the industrial lobby has private information about the unfavorable environmental and or health effects but can be held liable for damage ex post we derive the equilibrium properties of the contest in particular we derive conditions under which it is socially preferable for the regulator to decide according to the contest s outcome rather than according to an ex ante cost benefit analysis using his prior beliefs we find that the contest outperforms the ex ante cost benefit analysis only if the risk of judgment proofness is not too high

risk lovers and the rent over investment puzzle in this paper we prove existence and uniqueness of equilibrium in a rent seeking contest given a class of heterogeneous risk loving players we explore the role third order risk attitude plays in equilibrium and find that imprudence is sufficient for risk lovers to increase rent seeking investment above the risk neutral outcome moreover we show that rent can be fully dissipated in a standard tullock contest played by a large number of risk lovers

rent seeking incentives in share contests abstract this article investigates share contests in our framework we allow contestants to have more general preferences than have been used in the literature previous approaches have the unfortunate characteristic that contestants marginal rates of substitution between the rent share allocated by the contest and their effort is constant regardless of the size of the rent share this results in a conventional wisdom larger rents command more effort by providing a more general framework we show the reverse may also be true and we derive the conditions under which this is the case our approach then allows us to rationalize within a standard contest framework observations that rents might be more hotly contested when they become scarcer as has evidently been the case with the recent global contraction of public funds available for public policy

conflict and rent seeking success functions ratio vs difference models of relative success the rent seeking competitions studied by economists fall within a much broader category of conflict interactions that also includes military combats election campaigns industrial disputes lawsuits and sibling rivalries in the rent seeking literature each party s success pi which can be interpreted either as the probability of victory or as the proportion of the prize won has usually been taken to be a function of the ratio of the respective resource commitments alternatively however pi may instead be a function of the difference between the parties commitments to the contest the contest success function csf for the difference from is a logistic curve in which as is consistent with military experience increasing returns apply up to an inflection point at equal resource commitments a crucial flaw of the traditional ratio model is that neither onesided submission nor two sided peace between the parties can ever occur as a cournot equilibrium in contrast both of these outcomes are entirely consistent with a model in which success is a function of the difference between the parties resource commitments

rent seeking and optimal regulation in replenishable resource industries in this paper wasteful rent seeking behaviour has been shown to have important implications for the determination of the welfare maximizing regulatory policies of replenishable natural resource industries in general the incorporation of wasteful rent seeking activity into the analysis leads to policies which suggest a greater level of industry output than has been advocated by tradition policies that do not take rent seeking into account our analysis therefore supports a more laissez faire policy than has been recommended in the literature

rent seeking for pure public goods in this paper we present a formal analysis of rent seeking for public goods by two or more groups with different numbers of individuals we begin by considering equally wealthy groups under risk neutrality a case which constitutes our basic model several surprising and interesting results emerge from the analysis of this basic case the problem is then extended to deal with a groups with different wealth levels and b risk aversion this last extension brings about a further crop of interesting and useful results

orchestrating rent seeking contests contests have different sometimes quite complex organisational structures in particular while most of the existing literature focusses on simultaneous contests multistage contests are also quite frequently encountered this paper seeks to provide a rationale for the latter by endogenising the choice of a contest structure which is made by an organiser of a contest interested in maximising the efforts expended by the contenders

the uniqueness of pure strategy nash equilibrium in rent seeking games with risk averse players this article proves that if each player s measure of absolute risk aversion is nonincreasing in his her wealth then there exists a unique pure strategy nash equilibrium in the general rent seeking game where risk averse players can coexist with risk neutral players attitude toward risk can differ among players and concave production functions for lotteries are not necessarily the same among players

the design of rent seeking competitions committees preliminary and final contests the paper examines the common practice in multi contest rent seeking competitions where finalists are selected based on rent seekers efforts in a preliminary contest we find that for any single contest design rent seeking expenditures could be reduced by introducing a preliminary contest if the marginal returns to rent seeking effort in the preliminary contest is sufficiently low in addition to other reasons the paper argues that this may explain why such multi contest designs are common we argue that rent seeking expenditure in the preliminary stage represents the cost of reducing the number of contestants we also find that the practice of setting a higher quality standard in the final contest than the quality standard in the preliminary contest reduces rent seeking waste we derive an expression for the optimal number of finalists under certain conditions we find that the optimal number of finalists is directly proportional or equal to the square root of the number of potential contestants finally we show that whether rent seeking expenditures rise or fall when the rent is awarded by a committee instead of a single administrator depends on the sensitivity of the committee relative to that of the single administrator

risk averse rent seekers and the social cost of monopoly power there is now quite general recognition that the social cost of monopoly power encompasses the resources expended by individuals seeking to become the beneficiaries of monopoly rents however since the activity of rent seeking is generally not observable direct estimates of resources expended in quests to acquire monopoly power are usually impossible to come by 1 as a consequence the indirect approach of taking the observed value of monopoly rents as indicative of the unobserved value of the resources expended in rent seeking is quite generally adopted in approaches to evaluation of the social cost of such activity

stackelberg rent seeking in this paper i present a formal analysis of rent seeking games in which the players do not move simultaneously i consider rent seeking situations where the players are risk neutral and may value the prize differently the subgame perfect equilibrium outcome in this stackelberg game provides several surprising and interesting results i extend the problem to deal with cases of in complete information concerning the value a player has for the politically contestable rent

when are stable rights to rents bad stable enforceable property rights over resources normally furthers economic efficiency i argue that stable rights to government created rents and wealth transfers by contrast generate inefficiency secure rights to receive transfers increases rent seekers incentive to make political investments creating new transfers i demonstrate the point using a two period rent seeking game contestable transfers reduce the probability of establishing a transfer program and aggregate rent seeking expenditures strengthening transfer recipients rights increases the difficulty of eliminating a transfer program

rent seeking with non identical sharing rules the primary object of this paper is to examine the role of differential sharing rules within a collective rent seeking setting on the possible non existence of nash equilibrium focusing on groups that distribute part of the rent equally among their members and the residual according to relative effort we show that in rent seeking societies applying the two polar sharing rules equilibrium never exists in the general case where groups apply different but not necessarily the polar sharing rules we study the relationship between group variability in distributing rents and the problem of non existence of equilibrium in the rent seeking game

contests with an unknown number of contestants this paper studies rent seeking contests where the contestants do not know the number of actively competing contestants two models are compared in the first all players are risk neutral in the second all have constant absolute risk aversion if the expected fraction of active contestants is low an increase in the number of potential contestants increases individual rent seeking efforts this effect is in contrast to the complete information case where individual rent seeking efforts decrease in the number of contestants the effect is more likely under risk neutrality but also possible under risk aversion equilibrium rent seeking efforts are lower under risk aversion if and only if the expected fraction of active contestants is low

risk aversion heterogeneity and contests we introduce a novel method of modellingcontests that avoids the complexitiesencountered by the best response function approach we analyse contests in which i there are many risk averse players ii attitudes to risk may differ acrossindividuals and iii the technology thattransforms rent seeking effort intoprobability of winning may also differacross individuals we establish that ifevery player has a constant degree ofabsolute risk aversion a uniqueequilibrium exists we also establishcomparative static results and examine howthe level of rent dissipation is affectedby the heterogeneity of attitudes towardsrisk and the precise nature of the technology

the welfare costs of price controls for cars and color televisions in poland contrasting estimates of rent seeking from recent experience the welfare costs of price controls can vary enormously depending on the method of allocating the goods in shortage and the possible rent seeking costs that may result with full rent dissipation the welfare loss from price controls on polish color televisions in 1989 was about ten times the standard estimates of distortion costs which ignore rent seeking and was more than 100 percent of the value of domestic producers sales the methods of allocating cars however did not result in rent seeking costs the domestic price controls were an unintended implicit subsidy to imports subsidies for cars were estimated at 43 percent and for color televisions at 22 percent

systematic effects of capital service price definition on perceptions of input substitution earlier attempts at reconciling disparate substitution elasticity estimates examined differences in separability hypotheses data bases and estimation techniques as well as methods employed to construct capital service prices although these studies showed that differences in elasticity estimates between two or three studies may be attributable to the aforementioned features of the econometric models they have been unable to demonstrate this link statistically and establish the existence of systematic relationships between features of the econometric models and the perception of production technologies generated by those models using sectoral data covering the entire production side of the u s economy we estimate 34 production models for alternative definitions of the capital service price we employ substitution elasticities calculated from these models as dependent variables in the statistical search for systematic relationships between features of the econometric models and perceptions of the sec

risk aversion in rent seeking and rent augmenting games the effects of risk aversion are examined for two types of expenditures in rent seeking contests a rent seeking expenditures which improve the probability that the rent is obtained and b rent augmenting expenditures which increase the size of the rent to be awarded risk aversion is shown to reduce expenditures of type b unambiguously while having an indeterminate effect on those of type a these two contrasting results are shown to derive from the very different effects rent seeking and rent augmenting expenditures have on the riskiness of a player s position

the cost of rent seeking evidence from cellular telephone license lotteries the inventors of the theory of rent seeking used an analogy with competitive markets to conclude that all monopoly rents would be dissipated in the competition to obtain the property rights to them 23 29 subsequent theorists showed that this conclusion is quite sensitive to assumptions about foresight risk aversion conjectures and bias 15 21 30 since little quantitative information about actual rent seeking competitions is available the theory has developed in an empirical vacuum in this paper we attempt to fill that vacuum with an estimate of rent seeking expenditure by applicants in the federal communications commission s fcc cellular telephone license lotteries held between 1986 and 1989 we go on to compare expenditures with estimates of the value of the licenses at stake these lotteries constitute a unique natural experiment any u s citizen was eligible to enter each geographic lottery once and only once for an expense which we calculate as modest the lotteries were widely publicized and heavily entered there were over 320 000 applications one per market filed for 643 cellular licenses and third party application preparers entered the market rapidly because licenses were awarded sequentially prospective participants in later lotteries could find out that expected net returns from earlier lotteries were positive because of undersubscription the value of the prize was known because sales of previously awarded licenses had begun to take place before later lotteries were held and market analysts were using such sale prices to value licenses not yet awarded the later lotteries seem almost optimally contrived to maximize the dissipation of rents yet comparing the resources invested in entry the price of a fully prepared application with the rents available the market value of cellular telephone licenses shows that dissipation was far short of complete

shephard s lemma and rate of return regulation abstract by counter example this paper shows that in general shephard s lemma cannot be used for the usual formulation of the rate of return regulated cost function a solution to the problem is supplied

risk aversion and rent seeking an extension and some experimental evidence theoretical investigations indicate that the risk attitudes of individuals will effect the amount of rent that can be assumed to be dissipated by rent seeking activities following this line of investigation we extend hillman and katz s work to a small numbers case and demonstrate that the degree to which a monopoly rent is dissipated is dependent upon the structure of the risk attitudes of two risk averse individuals

do rent seeking groups announce their sharing rules i introduction rent seeking can be seen all around us firms or coalitions of firms expend resources to influence government officials who have authority to award monopoly rights self interested pressure groups lobby for government subsidies foreign producers exert effort to avoid imposing tariffs or quotas on their products interest groups or lobbyists contribute to the election of politicians who promise to advance favorable legislation research and development rd then the groups announce their decisions simultaneously before choosing their sharing rules we examine the groups decisions on releasing sharing rule information their sharing rules and the effort levels and payoffs of the individual players in equilibrium we formally consider the following three stage game in the first stage each group decides and announces whether it will release to the rival group the information about its sharing rule which will be determined in the second stage in the second stage the players in each group jointly choose their sharing rule and then each group releases the information about its sharing rule if it decided to do so in the first stage in the third stage all the players in both groups choose their effort levels simultaneously and independently at the end of this third stage the winning player is chosen and the winner shares the prize with the other players in his group according to the sharing rule on which they agreed in the second stage solving the game we find the following first the case where both groups release their sharing rule information never occurs in equilibrium second the case where neither group releases its sharing rule information occurs only if the players are evenly matched third when the players are unevenly matched one group releases its sharing rule information and the other does not

constitutional prohibitions in a rent seeking model i extend the standard rent seeking model to allow lobbying fora constitutional prohibition on wealth transfers i examinetwo issues 1 the ability of special interests withsignificant political capacity to block constitutional change and 2 the effect of adding a constitutional stage on totallobbying expenditures defeating a prohibition on wealthtransfers is a public good for rent seekers success inconstitutional politics merely allows them to lobby for wealthtransfers the resulting collective action problem for rentseekers in constitutional politics offsets the generalinterest s free rider problems reducing the probability oftransfers and expected total lobbying expenditures compared tothe traditional rent seeking contest introduction of aconstitutional stage also reverses several comparative staticsresults from the rent seeking game an increase in the numberof rent seekers or the general interest s consumers abilityto organize increase lobbying in the rent seeking game butgenerally reduce expected lobbying in the constitutionalprohibition game

tariffs subsidies and welfare with endogenous policy abstract it is a well established proposition of trade theory that in the absence of directly trade related distortions or policy goals subsidies are superior to tariffs for achieving any economic or non economic objective this paper shows that once the endogeneity of the distortion or non economic objective is allowed for the welfare ranking of various policies can be reversed the particular model analyzed is one where the level of non economic objectives that have to be fulfilled itself depends on the policy tools considered to fulfill them with this arises from the public good nature of tariffs compared to subsidies

imperfect rent dissipation with unionized labor traditional rent seeking theory focused only on socially wasteful expenditures by firms competing for restrictive regulations more recently rent defending expenditures by consumers have also been taken into account this paper extends the analysis by adding rent sharing expenditures by organized labor the paper merges the tullock lottery model and the monopoly union model and considers both a costless and a costly wage bargaining mechanism the participation of consumers and workers in the distributional contest is shown to reduce rather than increase the social cost of restrictive regulations the participation of consumers and workers also raises the probability of deregulation

strategic groups and rent dissipation we consider a rent seeking contest in which players can form strategic groups before expending their outlays we examine the profitability of endogenous group formation and the effect of such group formation on rent dissipation we show the following when just one strategic group is formed in equilibrium group formation is beneficial both to the group members and to the nonmembers and rent dissipation is smaller than with usual individual rent seeking however when more than two strategic groups are formed in equilibrium group formation is never profitable to any players and rent dissipation is greater than with individual rent seeking jel

efficient rents 2 free entry and efficient rent seeking in the competition for a monopoly right in which the number of bidders is fixed tullock and others have found the value of the resources spent in the aggregate to capture the transfer to be sometimes less than and sometimes greater than the value of the monopoly we think this approach to be incomplete since it leaves unanswered the question of what determines the number of individuals who will vie for the right to be the monopolist it is unsatisfactory to imagine for example that the franchisor sets the number of contestants one could then foresee that rent seeking would arise to influence the permissible number of bidders and this merely moves the rent seeking dissipation question one step back