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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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Douglas Davis
Robert Reilly

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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 Kluwer Academic Publishers 1998

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Publisher Info
Article provided by Springer in its journal Public Choice.

Volume (Year): 95 (1998)
Issue (Month): 1 (April)
Pages: 89-115
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Handle: RePEc:kap:pubcho:v:95:y:1998:i:1:p:89-115

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  1. 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. [Downloadable!] (restricted)
  2. Wenders, John T, 1987. "On Perfect Rent Dissipation," American Economic Review, American Economic Association, vol. 77(3), pages 456-59, June. [Downloadable!] (restricted)
  3. Shogren, Jason F & Baik, Kyung H, 1991. " Reexamining Efficient Rent-Seeking in Laboratory Markets," Public Choice, Springer, vol. 69(1), pages 69-79, February.
  4. Dougan, William R & Snyder, James M, 1993. " Are Rents Fully Dissipated?," Public Choice, Springer, vol. 77(4), pages 793-813, December.
  5. 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.
  6. 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. [Downloadable!] (restricted)
  7. Nitzan, Shmuel, 1991. " Rent-Seeking with Non-identical Sharing Rules," Public Choice, Springer, vol. 71(1-2), pages 43-50, August.
  8. Ellingsen, Tore, 1991. "Strategic Buyers and the Social Cost of Monopoly," American Economic Review, American Economic Association, vol. 81(3), pages 648-57, June. [Downloadable!] (restricted)
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Arthur J.H.C. Schram, 2002. "Experimental Public Choice," Tinbergen Institute Discussion Papers 02-106/1, Tinbergen Institute. [Downloadable!]
  2. John Cadigan & Pamela Schmitt & Kurtis Swope & Robert Shupp, 2004. "Multi-Period Rent-Seeking Contests with Carryover: Theory and Experimental Evidence," Departmental Working Papers 5, United States Naval Academy Department of Economics. [Downloadable!]
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  3. David Bullock & E. Rutström, 2007. "Policy making and rent-dissipation: An experimental test," Experimental Economics, Springer, vol. 10(1), pages 21-36, March. [Downloadable!] (restricted)
  4. David Schmidt & Robert S. Shupp & James Walker, 2005. "Resource Allocation Contests: Experimental Evidence," Working Papers 200506, Ball State University, Department of Economics, revised Feb 2005. [Downloadable!]
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  5. Alexander Matros & Wooyoung Lim & Theodore Turocy, 2009. "Raising Revenue With Raffles: Evidence from a Laboratory Experiment," Working Papers 377, University of Pittsburgh, Department of Economics, revised Feb 2009. [Downloadable!]
  6. Klaus Abbink & Jordi Brandts & Benedikt Herrmann & Henrik Orzen, 2009. "Inter-Group Conflict and Intra-Group Punishment in an Experimental Contest Game," Discussion Papers 2009-03, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham. [Downloadable!]
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  7. Yasar Barut & Dan Kovenock & Charles Noussair, 1999. "A Comparison of Multiple-Unit All-Pay and Winner-Pay Auctions Under Incomplete Information," CIG Working Papers FS IV 99-09, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG). [Downloadable!]
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  8. Dmitry Ryvkin, 2009. "Fatigue in dynamic tournaments," Working Papers wp2009_06_03, Department of Economics, Florida State University. [Downloadable!]
  9. Christiane Ernst & Christian Thöni, 2009. "Bimodal Bidding in Experimental All-Pay Auctions," University of St. Gallen Department of Economics working paper series 2009 2009-25, Department of Economics, University of St. Gallen. [Downloadable!]
  10. Subhasish M. Chowdhury & Dan Kovenock J. & Roman M. Sheremeta, 2009. "An Experimental Investigation of Colonel Blotto Games," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  11. Antonio Filippin, 2003. "Discrimination and workers' expectations: experimental evidence," Departemental Working Papers 2003-16, Department of Economics University of Milan Italy. [Downloadable!]
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  12. Bullock, David S. & Rutstrom, Elisabet E., 2001. "The Size Of The Prize: Testing Rent-Dissipation When Transfer Quantity Is Endogenous," 2001 Annual meeting, August 5-8, Chicago, IL 20447, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association). [Downloadable!]
  13. Xiaojing Kong, 2008. "Loss Aversion and Rent-Seeking: An Experimental Study," Discussion Papers 2008-13, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham. [Downloadable!]
  14. Florian Englmaier & Pablo Guillen & Loreto Llorente & Sander Onderstal & Rupert Sausgruber, 2006. "The Chopstick Auction: A Study of the Exposure Problem in Multi-Unit Auctions," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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  15. Miguel A. Fonseca, 2006. "It's not how you play the game, it's winning that matters: an experimental investigation of asymmetric contests," DOCUMENTOS DE CERAC 002927, CERAC -CENTRO DE RECURSOS PARA EL ANÁLISIS DE CONFLICTOS-. [Downloadable!]
  16. Douglas D. Davis & Laura Razzolini & Robert Reilly & Bart J. Wilson, 2003. "Raising Revenues for Charity: Auctions versus Lotteries," Working Papers 0301, VCU School of Business, Department of Economics. [Downloadable!]
  17. Christine Harbring & Bernd Irlenbusch & Matthias Kräkel & Reinhard Selten, 2004. "Sabotage in Asymmetric Contests – An Experimental Analysis," Bonn Econ Discussion Papers bgse12_2004, University of Bonn, Germany. [Downloadable!]
  18. Benedikt Herrmann & Henrik Orzen, 2008. "The appearance of homo rivalis: Social preferences and the nature of rent seeking," Discussion Papers 2008-10, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham. [Downloadable!]
  19. Lugovskyy, Volodymyr & Puzzello, Daniela & Tucker, Steven, 2008. "An experimental investigation of overdissipation in the all pay auction," MPRA Paper 8604, University Library of Munich, Germany. [Downloadable!]
  20. Muller, W. & Schotter, A., 2003. "Workaholics and drop outs in optimal organizations," Discussion Paper 43, Tilburg University, Center for Economic Research. [Downloadable!]
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