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Rent Dissipation And The Social Cost Of Price Policy

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  • Jay S. Coggins

Abstract

This paper uses a general equilibrium‐based exchange economy model to examine rent seeking for a price policy. Opposing interests spend resources to influence the government's choice of a price vector. Rents, the willingness to pay for the policy, are determined endogenously from the Nash equilibirum of a non‐cooperative game. Numerical simulations explore the degree to which rents are dissipated by wasteful rent seeking. It is found that dissipation, measured as the ratio of rent‐seeking costs to rents garnered, can grow without limit, and is greatest when opponents are evenly matched. Dissipation is smallest with widely disparate groups, a result that might help explain the underdissipation that seems to occur in many industries.

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  • 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.
  • Handle: RePEc:bla:ecopol:v:7:y:1995:i:2:p:147-166
    DOI: 10.1111/j.1468-0343.1995.tb00108.x
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    References listed on IDEAS

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    Cited by:

    1. Elie Appelbaum & Eliakim Katz, 1986. "Transfer seeking and avoidance: On the full social costs of rent seeking," Public Choice, Springer, vol. 48(2), pages 175-181, January.
    2. Bullock, David S., 2008. "Simulating the Effects of Supply and Demand Elasticities on Political-Economic Equilibrium," Agricultural Distortions Working Paper Series 48636, World Bank.
    3. David Bullock & E. Rutström, 2007. "Policy making and rent-dissipation: An experimental test," Experimental Economics, Springer;Economic Science Association, vol. 10(1), pages 21-36, March.
    4. 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).
    5. Bullock, David S. & Mittenzwei, Klaus, 2005. "Using Evolutionary Game Theory to Examine U.S. and EU Agricultural Policy Institutions," 2005 International Congress, August 23-27, 2005, Copenhagen, Denmark 24538, European Association of Agricultural Economists.
    6. Chen, Kai-Lih & Graham-Tomasi, Ted & Roe, Terry, 1993. "Political Economy and Pollution Regulation: Instrument Choice in a Lobbying Economy," Staff Paper Series 201174, Michigan State University, Department of Agricultural, Food, and Resource Economics.

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