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Efficient rent-seeking under varying cost structures

  • Chris Paul
  • Al Wilhite

Abstract

The rent-seeking paradigm, which was introduced by Tullock (1967), has proven useful for exploring a variety of economic decisions that lie outside the traditional profit maximizing framework. Early applications of Tullock’s insight (Becker, 1968; Krueger, 1974; Posner, 1975; Demsetz, 1976; Foster, 1981 and others) usually assumed the entire value of the rent would be dissipated by competition following the fashion of economic profits in competitive markets. In 1980 Tullock structured a simple game reflecting the decisions made in rent-seeking. The results generated by his model suggest residual rents may accrue to rent-seekers and, under certain conditions, resist dissipation. A number of studies followed Tullock’s 1980 paper (Corcoran, 1984; Corcoran and Karels, 1985; Higgins, Shugart and Tollison, 1985; Tullock, 1984, 1985, and 1987) which explore the dissipation of excess rents under various assumptions.

Keywords

Reaction Function Simple Game Revolutionary Activity Poker Game Total Rent 
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Notes

  1. 1.
    A candidate could lie during the campaign, but such a strategy is inherently short-lived. Still, there are two ways to reduce the cost of campaign promises. First, candidates can address issues they support personally, i.e., a candidate who believes in milk subsidies does not lose any latitude by promising support to MILKPAC. Second, vague campaign promises, e.g. being pro-family or anti-communist, lower the cost of campaign IOU’s because there is no expectation to deliver resources on these issues.Google Scholar
  2. 4.
    Tullock’s game refers to resources invested in a law suit. If the a priori evidence favors B, B has a favorable bias, the reaction functions resemble those presented in Figure 3.Google Scholar
  3. 5.
    While the poker game analogy is instructive, it is incomplete because a bet in poker does not affect the probability of winning when the number of players is fixed.Google Scholar

Copyright information

© Springer Science+Business Media New York 2001

Authors and Affiliations

  • Chris Paul
    • 1
  • Al Wilhite
    • 1
  1. 1.Department of Economics and FinanceUniversity of Alabama in HuntsvilleHuntsvilleUSA

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