Abstract
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.
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Notes
One notable exception is Congleton (1984), who shows that under certain assumptions less will be invested by a seeker attempting to obtain a right to rents from a committee than by a seeker attempting to obtain such a right from a single administrator.
Tullock (1980a: 99) models the process as one in which a ‘wealthy eccentric’ offers a fixed amount of cash as a lottery prize. The organizer is assumed to be sufficiently wealthy or sufficiently eccentric that he will not exercise his power to amass a staggering amount of wealth by setting N and r appropriately.
Tullock’s statement ( 1980a: 107) that long-run negative-sum games exist in poker and certain unspecified negotiations is unconvincing. The former, as he acknowledges, is a consumption good (and there are some who make a living for themselves by winning consistently ). Negotiators who persistently engage in the latter, even if acting as the agents of others, will face the survival problems outlined in the text above.
One possible argument against long-term and consolidated arrangements comes to mind. A politician might announce a value of r which exhausts rents from seekers, collect the bribes, and then announce that he was raising r and would offer seekers the chance to bid additional amounts. One method of establishing a reputation as one who does not do this is to subdivide opportunities to provide an adequate demonstration of honesty. Another is to administer several classes of opportunities (e.g., a legislator typically sits on more than one committee) and thus establish consistency.
Fisher (1985) argues the unlikelihood of constant returns to scale in a production function for obtaining monopolies. Here, however, we have a production function for obtaining lottery tickets, rather than for gaining a monopoly with certainty.
The question of dissipation by precocious investment is itself an extremely difficult empirical matter. The opportunities that will be put up for rent-seeking may arise at random and not be amenable to diversification of investments (e.g., inventions and human capital). The full dissipation result will then probably hold only under highly specific assumptions about capital market equilibrium.
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© 2001 Springer Science+Business Media New York
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Michaels, R. (2001). The design of rent-seeking competitions. In: Lockard, A.A., Tullock, G. (eds) Efficient Rent-Seeking. Springer, Boston, MA. https://doi.org/10.1007/978-1-4757-5055-3_8
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DOI: https://doi.org/10.1007/978-1-4757-5055-3_8
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