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Free-Rider Effects in Rent-Seeking Groups Competing for Public Goods

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  • Loehman, Edna
  • Quesnel, Fabrice N
  • Babb, Emerson M
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    Abstract

    This paper studies individual behavior within a group when there is rent-seeking and groups compete in the selection of a public good - a variant of the traditional public goods problem. The situation is different from traditional public goods because an individual may not receive no reward for contribution to the group if the group does not win. Based on theory, the optimal contribution varies strategically depending on the characteristics of the situation, individual risk preferences, income, and subjective probability of winning. Individual contributions or bids toward a group objective were tested experimentally. Results showed that use of a demand revealing mechanism did not produce a significant difference in individual contributions to group efforts when the level of reward was low and when rewards were indirect. However, the demand revealing mechanism caused a significant difference in bids when rewards were high and direct, thus indicating free-riding behavior. Copyright 1996 by Kluwer Academic Publishers

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    Bibliographic Info

    Article provided by Springer in its journal Public Choice.

    Volume (Year): 86 (1996)
    Issue (Month): 1-2 (January)
    Pages: 35-61

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    Handle: RePEc:kap:pubcho:v:86:y:1996:i:1-2:p:35-61

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    Web page: http://www.springerlink.com/link.asp?id=100332

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    Cited by:
    1. Hartley Furtom & Johannes Sauer & Maria Jensen, 2009. "Free-riding on rent seeking—an empirical analysis," Public Choice, Springer, vol. 140(3), pages 479-500, September.
    2. Dijkstra, Bouwe R., 1998. "Cooperation by way of support in a rent seeking contest for a public good," European Journal of Political Economy, Elsevier, vol. 14(4), pages 703-725, November.
    3. Lata Gangadharan & Veronika Nemes, 2005. "Impact of Risk and Uncertainty in the Provision of Local and Global Environmental Goods : An Experimental Analysis," Department of Economics - Working Papers Series 956, The University of Melbourne.

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