Advertisement

Economia Politica

, Volume 36, Issue 3, pp 785–804 | Cite as

Productive and unproductive competition: a unified framework

  • Alice Guerra
  • Barbara LuppiEmail author
  • Francesco Parisi
Article
  • 103 Downloads

Abstract

Conventional theories of competition classify contests as being either “productive”, when the competitive efforts generate a surplus for society, or “unproductive”, when competition generates no social surplus and merely distributes already existing resources. These two discrete categories of competition create a division of real-world situations into analytical categories that fails to recognize the entire spectrum of competitive activities. Taking the existing models of productive and unproductive competition as benchmark idealizations, this paper revisits the relationship between the privately and socially optimal levels of competition in the full range of intermediate cases, as well as in the extremum cases of destructive and super-productive competition.

Keywords

Contests Rent seeking Unproductive competition Productive competition Patent races 

JEL Classification

C72 D72 

References

  1. Arrow, K. (1962). Economic welfare and the allocation of resources for invention. In The rate and direction of inventive activity: Economic and social factors. Universities-National Bureau Committee for Economic Research, Committee on Economic Growth of the Social Science Research Council (pp. 609–626). Princeton University Press, Princeton. ISBN: 0-87014-304-2Google Scholar
  2. Barzel, Y. (1997). Economic Analysis of property rights. Political Economy of Institutions and Decisions. Cambridge: Cambridge University Press.CrossRefGoogle Scholar
  3. Baye, M. R., & Hoppe, H. C. (2003). The strategic equivalence of rent-seeking, innovation, and patent-race games. Games and Economic Behavior, 44(2), 217–226.CrossRefGoogle Scholar
  4. Baye, M. R., Kovenock, D., & De Vries, C. G. (1996). The all-pay auction with complete information. Economic Theory, 8(2), 291–305.CrossRefGoogle Scholar
  5. Baye, M. R., Kovenock, D., & De Vries, C. G. (2012). Contests with rank-order spillovers. Economic Theory, 51(2), 315–350.CrossRefGoogle Scholar
  6. Bhagwati, J. N. (1982). Directly unproductive, profit-seeking (DUP) activities. The Journal of Political Economy, 90, 988–1002.CrossRefGoogle Scholar
  7. Blavatskyy, P. R. (2010). Contest success function with the possibility of a draw: axiomatization. Journal of Mathematical Economics, 46(2), 267–276.CrossRefGoogle Scholar
  8. Buchanan, J. M. (1980). Rent seeking and profit seeking. In J. M. Buchanan, R. D. Tollison, & G. Tullock (Eds.), Toward a theory of the rent-seeking society (pp. 3–15). College Station, TX: Texas A&M University Press.Google Scholar
  9. Buchanan, J. M. (1983). Rent seeking, noncompensated transfers, and laws of succession. Journal of Law and Economics, 26(1), 71–85.CrossRefGoogle Scholar
  10. Chowdhury, S. M., & Sheremeta, R. M. (2011a). A generalized Tullock contest. Public Choice, 147(3–4), 413–420.CrossRefGoogle Scholar
  11. Chowdhury, S. M., & Sheremeta, R. M. (2011b). Multiple equilibria in Tullock contests. Economics Letters, 112(2), 216–219.CrossRefGoogle Scholar
  12. Chowdhury, S. M., & Sheremeta, R. M. (2015). Strategically equivalent contests. Theory and Decision, 78(4), 587–601.CrossRefGoogle Scholar
  13. Chung, T.-Y. (1996). Rent-seeking contest when the prize increases with aggregate efforts. Public Choice, 87(1–2), 55–66.CrossRefGoogle Scholar
  14. Congleton, R. D. (1986). Rent-seeking aspects of political advertising. Public Choice, 49(3), 249–263.CrossRefGoogle Scholar
  15. Congleton, R. D. (1989). Efficient status seeking: Externalities, and the evolution of status games. Journal of Economic Behavior and Organization, 11(2), 175–190.CrossRefGoogle Scholar
  16. Congleton, R. D., & Hillman, A. (2015). A companion to rent seeking: Theory and practice. Cheltenham, UK: Edward Elgar.Google Scholar
  17. Congleton, R. D., Hillman, A. L., & Konrad, K. A. (2008). 40 years of research on rent seeking: Theory of rent seeking (Vol. 1). Heidelberg: Springer.CrossRefGoogle Scholar
  18. Congleton, R. D., Hillman, A. L., & Konrad, K. A. (2008b). 40 years of research on rent seeking: Rent seeking in practice (Vol. 2). Heidelberg: Springer.CrossRefGoogle Scholar
  19. Cowling, K., & Mueller, D. C. (1978). The social costs of monopoly power. The Economic Journal, 88, 727–748.CrossRefGoogle Scholar
  20. Crain, W. M., & Ekelund, R. B. (1976). Chadwick and demsetz on competition and regulation. Journal of Law and Economics, 19(1), 149–162.CrossRefGoogle Scholar
  21. Dari-Mattiacci, G., Langlais, E., Lovat, B., & Parisi, F. (2007). Crowding-out in productive and redistributive rent-seeking. Public Choice, 133(1–2), 199–229.CrossRefGoogle Scholar
  22. Dasgupta, A., & Nti, K. O. (1998). Designing an optimal contest. European Journal of Political Economy, 14(4), 587–603.CrossRefGoogle Scholar
  23. Dasgupta, P., & Stiglitz, J. (1980). Uncertainty, industrial structure, and the speed of R&D. The Bell Journal of Economics, 1980, 1–28.CrossRefGoogle Scholar
  24. Dechenaux, E., Kovenock, D., & Sheremeta, R. M. (2015). A survey of experimental research on contests, all-pay auctions and tournaments. Experimental Economics, 18(4), 609–669.CrossRefGoogle Scholar
  25. Dechenaux, E., & Mancini, M. (2008). Auction-theoretic approach to modeling legal systems: An experimental analysis. Applied Economics Research Bulletin, 2, 142–177.Google Scholar
  26. Demsetz, H. (1973). Industry structure, market rivalry, and public policy. Journal of Law and Economics, 16(1), 1–9.CrossRefGoogle Scholar
  27. Demsetz, H. (1976). Economics as a guide to antitrust regulation. Journal of Law and Economics, 1976, 371–384.CrossRefGoogle Scholar
  28. Denicolo, V. (1999). The optimal life of a patent when the timing of innovation is stochastic. International Journal of Industrial Organization, 17(6), 827–846.CrossRefGoogle Scholar
  29. Dixit, A., & Norman, V. (1978). Advertising and welfare. The Bell Journal of Economics, 28, 185–200.Google Scholar
  30. Dixit, A. K. (1987). Strategic behavior in contests. American Economic Review, 77(5), 891–98.Google Scholar
  31. Fung, M. K. (2002). Technological opportunity and economies of scale in research productivity: A study on three global industries. Review of Industrial Organization, 21(4), 419–436.CrossRefGoogle Scholar
  32. Gilbert, R. J., & Katz, M. L. (2011). Efficient division of profits from complementary innovations. International Journal of Industrial Organization, 29(4), 443–454.CrossRefGoogle Scholar
  33. Gupta, S., & Swenson, C. W. (2003). Rent seeking by agents of the firm. Journal of Law and Economics, 46(1), 253–268.CrossRefGoogle Scholar
  34. Hartwick, J. M. (1991). Patent races optimal with respect to entry. International Journal of Industrial Organization, 9(2), 197–207.CrossRefGoogle Scholar
  35. Hillman, A. L., & Riley, J. G. (1989). Politically contestable rents and transfers. Economics and Politics, 1(1), 17–39.CrossRefGoogle Scholar
  36. Hillman, A. L., & Samet, D. (1987). Dissipation of contestable rents by small numbers of contenders. Public Choice, 54(1), 63–82.CrossRefGoogle Scholar
  37. Hirshleifer, J. (1971). The private and social value of information and the reward to inventive activity. The American Economic Review, 61(4), 561–574.Google Scholar
  38. Konrad, K. A. (2009). Strategy and Dynamics in Contests. New York, NY: Oxford University Press.Google Scholar
  39. Krishna, V., & Morgan, J. (1997). An analysis of the war of attrition and the all-pay auction. Journal of Economic Theory, 72(2), 343–362.CrossRefGoogle Scholar
  40. Krueger, A. O. (1974). The political economy of the rent-seeking society. The American Economic Review, 64, 291–303.Google Scholar
  41. Lazear, E. P., & Rosen, S. (1981). Rank-order tournaments as optimum labor contracts. The Journal of Political Economy, 89(5), 841–864.CrossRefGoogle Scholar
  42. Lee, S., & Kang, J. H. (1998). Collective contests with externalities. European Journal of Political Economy, 14(4), 727–738.CrossRefGoogle Scholar
  43. Lin, P. (1997). License to be more innovative. Review of Industrial Organization, 12(2), 271–278.CrossRefGoogle Scholar
  44. Littlechild, S. C. (1981). Misleading calculations of the social costs of monopoly power. The Economic Journal, 362, 348–363.CrossRefGoogle Scholar
  45. Ménière, Y., & Parlane, S. (2008). Innovation in the shadow of patent litigation. Review of Industrial Organization, 32(2), 95–111.CrossRefGoogle Scholar
  46. Moldovanu, B., & Sela, A. (2001). The optimal allocation of prizes in contests. American Economic Review, 91, 542–558.CrossRefGoogle Scholar
  47. Münster, J. (2009). Group contest success functions. Economic Theory, 41(2), 345–357.CrossRefGoogle Scholar
  48. Nitzan, S. (1991). Collective rent dissipation. The Economic Journal, 101, 1522–1534.CrossRefGoogle Scholar
  49. Nitzan, S. (1994). Modelling rent-seeking contests. European Journal of Political Economy, 10(1), 41–60.CrossRefGoogle Scholar
  50. Nti, K. O. (1997). Comparative statics of contests and rent-seeking games. International Economic Review, 38, 43–59.CrossRefGoogle Scholar
  51. Nti, K. O. (1999). Rent-seeking with asymmetric valuations. Public Choice, 98(3–4), 415–430.CrossRefGoogle Scholar
  52. Paul, C., & Wilhite, A. (1994). Illegal markets and the social costs of rent-seeking. Public Choice, 79(1–2), 105–115.CrossRefGoogle Scholar
  53. Rai, B. K., & Sarin, R. (2009). Generalized contest success functions. Economic Theory, 40(1), 139–149.CrossRefGoogle Scholar
  54. Skaperdas, S., & Grofman, B. (1995). Modeling negative campaigning. American Political Science Review, 89(01), 49–61.CrossRefGoogle Scholar
  55. Tullock, G. (1967). The welfare costs of tariffs, monopolies, and theft. Western Economic Journal, 5(3), 224–32.Google Scholar
  56. Tullock, G. (1980). Efficient rent-seeking. In J. M. Buchanan, R. D. Tollison, & G. Tullock (Eds.), Toward a Theory of the Rent-Seeking Society (pp. 97–112). College Station, TX: Texas A&M University Press.Google Scholar

Copyright information

© Springer International Publishing AG 2017

Authors and Affiliations

  1. 1.Department of Business and PoliticsCopenhagen Business SchoolCopenhagenDenmark
  2. 2.Department of EconomicsUniversity of Modena and Reggio EmiliaModenaItaly
  3. 3.Department of Economics, School of Law and University of BolognaUniversity of MinnesotaMinneapolisUSA

Personalised recommendations