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Do Too Many Cooks Always Spoil the Stew? An Experimental Analysis of Rent-Seeking and the Role of a Strategic Buyer

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  • Davis, Douglas D
  • Reilly, Robert J

Abstract

Laboratory methods are used to evaluate the effects of institutional arrangements and rent-defending activity on rent-seeking auction outcomes. In part, Nash equilibrium predictions are a useful behavioral guide: as predicted, more rents are dissipated in perfectly-discriminating auctions, where the high-bidder wins, than in lotteries, where relative bids determine the chance of winning. Also as predicted, the introduction of a rent-defending buyer reduces social costs. Nevertheless, the social costs of rent-seeking consistently exceed predicted levels. Moreover, individual bidding, especially by buyers, deviates markedly from Nash predictions. Copyright 1998 by Kluwer Academic Publishers

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Bibliographic Info

Article provided by Springer in its journal Public Choice.

Volume (Year): 95 (1998)
Issue (Month): 1-2 (April)
Pages: 89-115

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Handle: RePEc:kap:pubcho:v:95:y:1998:i:1-2:p:89-115

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  1. Torsten Schmidt, 1992. "Rent-Seeking Firms And Consumers: An Equilibrium Analysis," Economics and Politics, Wiley Blackwell, vol. 4(2), pages 137-149, 07.
  2. Elie Appelbaum & Eliakim Katz, 1996. "Transfer seeking and avoidance: On the full social costs of rent seeking," Working Papers 1996_11, York University, Department of Economics.
  3. Arye Hillman & Dov Samet, 1987. "Characterizing equilibrium rent-seeking behavior: A reply to Tullock," Public Choice, Springer, vol. 54(1), pages 85-87, January.
  4. Dougan, William R & Snyder, James M, 1993. " Are Rents Fully Dissipated?," Public Choice, Springer, vol. 77(4), pages 793-813, December.
  5. Ellingsen, T., 1990. "Strategic Buyers and the Social Cost of Monopoly," Papers 05-90, Norwegian School of Economics and Business Administration-.
  6. Wenders, John T, 1987. "On Perfect Rent Dissipation," American Economic Review, American Economic Association, vol. 77(3), pages 456-59, June.
  7. Tollison, Robert D, 1982. "Rent Seeking: A Survey," Kyklos, Wiley Blackwell, vol. 35(4), pages 575-602.
  8. Nitzan, Shmuel, 1991. " Rent-Seeking with Non-identical Sharing Rules," Public Choice, Springer, vol. 71(1-2), pages 43-50, August.
  9. Posner, Richard A, 1975. "The Social Costs of Monopoly and Regulation," Journal of Political Economy, University of Chicago Press, vol. 83(4), pages 807-27, August.
  10. Shogren, Jason F & Baik, Kyung H, 1991. " Reexamining Efficient Rent-Seeking in Laboratory Markets," Public Choice, Springer, vol. 69(1), pages 69-79, February.
  11. Millner, Edward L & Pratt, Michael D, 1991. " Risk Aversion and Rent-Seeking: An Extension and Some Experimental Evidence," Public Choice, Springer, vol. 69(1), pages 81-92, February.
  12. Fisher, Franklin M, 1985. "The Social Costs of Monopoly and Regulation: Posner Reconsidered," Journal of Political Economy, University of Chicago Press, vol. 93(2), pages 410-16, April.
  13. Edward Millner & Michael Pratt, 1989. "An experimental investigation of efficient rent-seeking," Public Choice, Springer, vol. 62(2), pages 139-151, August.
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