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Rent‐Seeking Firms And Consumers: An Equilibrium Analysis

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  • TORSTEN SCHMIDT

Abstract

This paper examines the probability of success in a rent‐seeking contest as a general function of the resources that both firms and consumers devote to lobbying the government. The object of lobbying is a possible restriction of market supply, where the likelihood that supply will be restricted to a given extent depends on everyone's lobbying efforts. In equilibrium the expected social loss due to rent‐seeking activities is at most equal to the size of the contested rent, and this upper bound does not depend on the active participation of consumers in the contest. Markets in which supply is not restricted may also be associated with rent‐seeking waste. Finally, consumers' rent‐seeking efforts are shown to be socially productive, both on the margin and in total.

Suggested Citation

  • Torsten Schmidt, 1992. "Rent‐Seeking Firms And Consumers: An Equilibrium Analysis," Economics and Politics, Wiley Blackwell, vol. 4(2), pages 137-149, July.
    • Handle: RePEc:bla:ecopol:v:4:y:1992:i:2:p:137-149
    DOI: 10.1111/j.1468-0343.1992.tb00059.x
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    Cited by:

    1. Hans Haller & Richard Milam, 2010. "Protection at Stake," Korean Economic Review, Korean Economic Association, vol. 26, pages 267-286.
    2. Gil Epstein & Shmuel Nitzan, 2006. "The struggle over migration policy," Journal of Population Economics, Springer;European Society for Population Economics, vol. 19(4), pages 703-723, October.
    3. Epstein, Gil S. & Nitzan, Shmuel, 2004. "Strategic restraint in contests," European Economic Review, Elsevier, vol. 48(1), pages 201-210, February.
    4. Epstein, Gil S. & Mealem, Yosef, 2013. "Politicians, Governed vs. Non-Governed Interest Groups and Rent Dissipation," IZA Discussion Papers 7736, Institute of Labor Economics (IZA).
    5. Epstein, Gil S. & Nitzan, Shmuel, 2003. "The social cost of rent seeking when consumer opposition influences monopoly behavior," European Journal of Political Economy, Elsevier, vol. 19(1), pages 61-69, March.
    6. Kahana, Nava & Nitzan, Shmuel, 1999. "Uncertain preassigned non-contestable and contestable rents," European Economic Review, Elsevier, vol. 43(9), pages 1705-1721, October.
    7. Gil Epstein & Yosef Mealem, 2015. "Politicians, governed versus non-governed interest groups and rent dissipation," Theory and Decision, Springer, vol. 79(1), pages 133-149, July.
    8. Keem, Jung Hoon, 2001. "The social cost of monopoly when consumers resist," European Journal of Political Economy, Elsevier, vol. 17(3), pages 633-639, September.
    9. Davis, Douglas D & Reilly, Robert J, 1998. "Do Too Many Cooks Always Spoil the Stew? An Experimental Analysis of Rent-Seeking and the Role of a Strategic Buyer," Public Choice, Springer, vol. 95(1-2), pages 89-115, April.
    10. Kyung Hwan Baik, 1994. "Winner‐Help‐Loser Group Formation In Rent‐Seeking Contests," Economics and Politics, Wiley Blackwell, vol. 6(2), pages 147-162, July.
    11. repec:elg:eechap:15325_4 is not listed on IDEAS
    12. Jay S. Coggins, 1995. "Rent Dissipation And The Social Cost Of Price Policy," Economics and Politics, Wiley Blackwell, vol. 7(2), pages 147-166, July.

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