Abstract
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.
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The author thanks the Faculty Recruitment Program of the Ford and Rockefeller Foundations for financial support. Comments by an anonymous referee which altered the texture and thrust of the paper were most helpful. Excellent clerical help by V. Almanon is gratefully acknowledged.
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Fabella, R.V. The Olson ratio and indirectly endogenous rent. Public Choice 89, 325–337 (1996). https://doi.org/10.1007/BF00159362
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DOI: https://doi.org/10.1007/BF00159362