Advertisement

Public Choice

, Volume 99, Issue 3–4, pp 439–454 | Cite as

The incidence of overdissipation in rent-seeking contests

  • Michael R. Baye
  • Dan Kovenock
  • Casper G. de Vries
Article

Abstract

Tullock's analysis of rent seeking and overdissipation is reconsidered. We show that, while equilibrium strategies do not permit overdissipation in expectation, for particular realizations of players' mixed strategies the total amount spent competing for rents can exceed the value of the prize. We also show that the cross-sectional incidence of overdissipation in the perfectly discriminating contest ranges from 0.50 to 0.44 as the number of players increases from two to infinity. Thus, even though the original analysis of overdissipation is flawed, there are instances in which rent-seekers spend more than the prize is worth.

Keywords

Public Finance Mixed Strategy Equilibrium Strategy Original Analysis Rent Seek 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  1. Abramovitz, M. and Stegun, I. (1970). Handbook of Mathematical Functions. New York: Dover.Google Scholar
  2. Allard, R.J. (1988). Rent-seeking with non-identical players. Public Choice 57: 3–14.Google Scholar
  3. Baye, M.R., Kovenock, D. and de Vries, C.G. (1993). Rigging the lobbying process: An application of the all-pay auction. American Economic Review 83: 289–294.Google Scholar
  4. Baye, M.R., Kovenock, D. and de Vries, C.G. (1996). The all-pay auction with complete information. Economic Theory 8: 291–305.Google Scholar
  5. Baye, M.R., Kovenock, D. and de Vries, C.G. (1989). The economics of all-pay, winner-takeall, contests. Texas A & M University Working Paper: 89–21.Google Scholar
  6. Baye, M.R., Kovenock, D. and de Vries, C.G. (1994). The solution to the Tullock rent-seeking game when R > 2: Mixed-strategy equilibria and mean dissipation rates. Public Choice 81: 363–380.Google Scholar
  7. Baye, M.R., Kovenock, D. and de Vries, C.G. (1997). The incidence of overdissipation in rent-seeking contests, Tinbergen Institute working paper, TI97–045/2.Google Scholar
  8. Bhagwati, N.J. (1982). Directly unproductive profitseeking (DUP) activities. Journal of Political Economy 90: 988–1002.Google Scholar
  9. Brandenburger, A. (1992). Knowledge and equilibrium in games. Journal of Economic Perspectives 6: 83–102.Google Scholar
  10. Brooks, M. and Heijdra, B. (1989). An exploration of rent seeking. Economic Record 65: 32–50.Google Scholar
  11. Che, Y. and Gale, I. (1996). Financial constraints in auctions: Effects and antidotes. Advances in Applied Microeconomics 6: 97–120.Google Scholar
  12. Corcoran, W. (1984). Long-run equilibrium and total expenditures in rent-seeking. Public Choice 43: 89–94.Google Scholar
  13. Corcoran, W. and Karels, G. (1985). Rent-seeking behavior in the long-run. Public Choice 46: 227–247.Google Scholar
  14. Ellingsen, T. (1991). Strategic buyers and the social cost of monopoly. American Economic Review 81: 648–657.Google Scholar
  15. Fudenberg, D. and Tirole, O. (1987). Understanding rent dissipation: On the use of game theory in industrial organization. AEA Papers and Proceedings 77: 176–183.Google Scholar
  16. Higgins, R., Shughart, W. and Tollison, R. (1985). Free entry and efficient rent-seeking. Public Choice 46: 247–258.Google Scholar
  17. Hillman, A. and Riley, J. (1989). Politically contestable rents and transfers. Economics and Politics 1: 17–39.Google Scholar
  18. Hillman A. and Samet, D. (1987). Dissipation of contestable rents by small numbers of contenders. Public Choice 54: 63–8Google Scholar
  19. Krueger, A. (1974). The political economy of the rent-seeking society. American Economic Review 64: 291–303.Google Scholar
  20. Leininger, W. (1993). More efficient rent-seeking: A Münchhausen solution. Public Choice 75: 43–62.Google Scholar
  21. Leininger, W. and Yang, C. (1994). Dynamic rent-seeking games. Games and Economic Behavior 7: 406–427.Google Scholar
  22. Linster, B.G. (1993). A rent-seeking model of international competition and alliances. Defence Economics 4: 213–226.Google Scholar
  23. Michaels, R. (1988). The design of rent-seeking competitions. Public Choice 56: 17–29.Google Scholar
  24. Millner, E.L. and Pratt, M.D. (1989). An experimental investigation of efficient rent-seeking. Public Choice 62: 139–151.Google Scholar
  25. Millner, E.L. and Pratt, M.D. (1990). Risk aversion and rent-seeking: An extension and some experimental evidence. Public Choice 69: 81–92.Google Scholar
  26. Nitzan, S. (1991). Collective rent dissipation. Economic Journal 101: 1522–1534.Google Scholar
  27. Nitzan, S. (1994). Modeling rent-seeking contests. European Journal of Political Economy 10: 41–60.Google Scholar
  28. Paul, C. and Wilhite, A. (1991). Rent-seeking, rent-defending, and rent-dissipation. Public Choice 71: 61–70.Google Scholar
  29. Posner, R. (1975). The social costs of monopoly and regulation. Journal of Political Economy 83: 807–827.Google Scholar
  30. Potters, J., de Vries, C.G. and Van Winden, F. (1997). Laboratories are conducive to rational rent seeking and overdissipation. Paper presented at Tinbergen Institute Conference on Contests.Google Scholar
  31. Rowley, C. (1991). Gordon Tullock: Entrepreneur of public choice. Public Choice 71: 149–169.Google Scholar
  32. Tullock, G. (1967). The welfare costs of tariffs, monopolies and theft. Western Economic Journal 5: 224–232.Google Scholar
  33. Tullock, G. (1975). On the efficient organization of trials. Kyklos 28: 745–762.Google Scholar
  34. Tullock, G. (1980). Efficient rent-seeking. In J.M. Buchanan, R. Tollison and G. Tullock (Eds.), Toward a theory of the rent-seeking society, 97–112. College Station: Texas A&M University Press.Google Scholar
  35. Tullock, G. (1984). Long-run equilibrium and total expenditures in rent-seeking: A comment. Public Choice 43: 95–97.Google Scholar
  36. Tullock, G. (1985). Back to the bog. Public Choice 46: 259–263.Google Scholar
  37. Tullock, G. (1987). Another part of the swamp. Public Choice 54: 83–84.Google Scholar
  38. Tullock, G. (1989). Editorial comment. Public Choice 62: 153–154.Google Scholar
  39. Tullock, G. (1995). The reluctant games person – A comment on Baye, Kovenock and de Vries. Public Choice 85: 189–192.Google Scholar

Copyright information

© Kluwer Academic Publishers 1999

Authors and Affiliations

  • Michael R. Baye
    • 1
  • Dan Kovenock
    • 2
  • Casper G. de Vries
    • 3
  1. 1.Department of Business Economics and Public PolicyIndiana University, School of BusinessBloomingtonU.S.A
  2. 2.Purdue University and Tinbergen InstituteThe Netherlands
  3. 3.Erasmus Universiteit Rotterdam and Tinbergen InstituteThe Netherlands

Personalised recommendations