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On the Allocative Effects of Rent Seeking


  • Corchon, Luis C


We consider the effects of rent-seeking activities on resource allocation. Before rent-seeking activities take place, there are prior probabilities that an object will be given to one of several agents. The posterior probability depends on prior probabilities and the expenses incurred by all agents. In the case of two agents who equally value the object, prior and posterior probabilities coincide, and thus rent seeking has no effect on resource allocation. If there are two agents with different valuations of the object or we have more than two agents, rent seeking matters and posterior probabilities reflect the valuations of the agents. Copyright 2000 by Blackwell Publishing Inc.

Suggested Citation

  • Corchon, Luis C, 2000. " On the Allocative Effects of Rent Seeking," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 2(4), pages 483-491.
  • Handle: RePEc:bla:jpbect:v:2:y:2000:i:4:p:483-91

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    References listed on IDEAS

    1. Keith J. Crocker & John Morgan, 1998. "Is Honesty the Best Policy? Curtailing Insurance Fraud through Optimal Incentive Contracts," Journal of Political Economy, University of Chicago Press, vol. 106(2), pages 355-375, April.
    2. Spence, Michael & Zeckhauser, Richard, 1971. "Insurance, Information, and Individual Action," American Economic Review, American Economic Association, vol. 61(2), pages 380-387, May.
    3. Picard, Pierre, 1996. "Auditing claims in the insurance market with fraud: The credibility issue," Journal of Public Economics, Elsevier, vol. 63(1), pages 27-56, December.
    4. Mookherjee, Dilip & Png, I P L, 1990. "Enforcement Costs and the Optimal Progressivity of Income Taxes," Journal of Law, Economics, and Organization, Oxford University Press, vol. 6(2), pages 410-431, Fall.
    5. Townsend, Robert M., 1979. "Optimal contracts and competitive markets with costly state verification," Journal of Economic Theory, Elsevier, vol. 21(2), pages 265-293, October.
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    Cited by:

    1. Birendra Rai & Rajiv Sarin, 2009. "Generalized contest success functions," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 40(1), pages 139-149, July.
    2. Alcalde, José & Dahm, Matthias, 2013. "Competition for procurement shares," Games and Economic Behavior, Elsevier, vol. 80(C), pages 193-208.
    3. Eggert, Wolfgang & Itaya, Jun-ichi & Mino, Kazuo, 2011. "A dynamic model of conflict and appropriation," Journal of Economic Behavior & Organization, Elsevier, vol. 78(1), pages 167-182.
    4. Birendra K. Rai & Rajiv Sarin, 2007. "Parametric Contest Success Functions," Jena Economic Research Papers 2007-010, Friedrich-Schiller-University Jena.
    5. Satya R. Chakravarty & Bhargav Maharaj, 2014. "New contest success functions," Working Papers 340, ECINEQ, Society for the Study of Economic Inequality.
    6. Wang Zhewei, 2010. "The Optimal Accuracy Level in Asymmetric Contests," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 10(1), pages 1-18, April.
    7. Stephen Dobson & John Goddard & Frank Stahler, 2008. "Effort levels in contests: an empirical application of the Tullock model," Working Papers 2008/9, Nottingham Trent University, Nottingham Business School, Economics Division.

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