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A Theory of Rent Seeking with Informational Foundations

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  • Johan N.M. Lagerlöf

    ()
    (Department of Economics, Royal Holloway, University of London)

Abstract

I develop a model of rent seeking with informational foundations and an arbitrary number of rent seekers, and I compare the results with Tullock's (1980) classic model where the influence activities are "black-boxed." Given the microfoundations, the welfare consequences of rent seeking can be studied. In particular, I show that competition among rent seekers can be socially beneficial, since the additional information that the decision maker gets access to makes the increase in rent-seeking expenditures worthwhile. However, the analysis also highlights a logic that, under natural parameter assumptions, makes the rent seekers spend more resources on rent seeking than is in society's interest, which is consistent with the spirit of the rent-seeking literature.

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Bibliographic Info

Paper provided by Department of Economics, Royal Holloway University of London in its series Royal Holloway, University of London: Discussion Papers in Economics with number 06/04.

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Date of creation: Sep 2006
Date of revision: Sep 2006
Handle: RePEc:hol:holodi:0604

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Keywords: Rent seeking; competition; lobbying; information acquisition; disclosure; welfare;

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References

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  1. Nitzan, Shmuel, 1994. "Modelling rent-seeking contests," European Journal of Political Economy, Elsevier, vol. 10(1), pages 41-60, May.
  2. Lohmann, Susanne, 1994. "Information Aggregation through Costly Political Action," American Economic Review, American Economic Association, vol. 84(3), pages 518-30, June.
  3. Morten Bennedsen & Sven E. Feldmann, 2002. "Lobbying Legislatures," Journal of Political Economy, University of Chicago Press, vol. 110(4), pages 919-948, August.
  4. Potters, J.J.M. & Winden, F. van, 1992. "Lobbying and asymmetric information," Open Access publications from Tilburg University urn:nbn:nl:ui:12-223989, Tilburg University.
  5. Heidhues, Paul & Lagerlöf, Johan N.M., 2003. "On the Desirability of an Efficiency Defense in Merger Control," CEPR Discussion Papers 3841, C.E.P.R. Discussion Papers.
  6. Krueger, Anne O, 1974. "The Political Economy of the Rent-Seeking Society," American Economic Review, American Economic Association, vol. 64(3), pages 291-303, June.
  7. Lars Frisell & Johan N. M. Lagerlöf, 2007. "A Model of Reputation in Cheap Talk," Scandinavian Journal of Economics, Wiley Blackwell, vol. 109(1), pages 49-70, 03.
  8. Paul Milgrom & John Roberts, 1986. "Relying on the Information of Interested Parties," RAND Journal of Economics, The RAND Corporation, vol. 17(1), pages 18-32, Spring.
  9. Laffont, Jean-Jacques & Tirole, Jean, 1991. "The Politics of Government Decision-Making: A Theory of Regulatory Capture," The Quarterly Journal of Economics, MIT Press, vol. 106(4), pages 1089-127, November.
  10. Becker, Gary S, 1983. "A Theory of Competition among Pressure Groups for Political Influence," The Quarterly Journal of Economics, MIT Press, vol. 98(3), pages 371-400, August.
  11. Tullock, Gordon, 1975. "On the Efficient Organization of Trials," Kyklos, Wiley Blackwell, vol. 28(4), pages 745-62.
  12. 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.
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Cited by:
  1. Stergios Skaperdas & Samarth Vaidya, 2007. "Persuasion as a Contest," CESifo Working Paper Series 2160, CESifo Group Munich.
  2. Martin Gregor, 2011. "Corporate lobbying: A review of the recent literature," Working Papers IES 2011/32, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Nov 2011.
  3. Etienne Farvaque & Gael Lagadec, 2009. "Electoral Control when Policies are for Sale," CESifo Working Paper Series 2522, CESifo Group Munich.

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