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Complete rent dissipation when the number of rent seekers is uncertain

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  • Kahana, Nava
  • Klunover, Doron

Abstract

The focal question in the theory of rent seeking is the extent of rent dissipation as the indicator of social loss. In general, rent-seeking models assume that the number of contenders in a rent-seeking contest is known with certainty but, given the hidden nature of rent seeking, participants in rent seeking more usually can be expected to face an uncertain number of rivals. We show that, in a Tullock contest with a stochastic number of participants, complete ex-ante rent dissipation is consistent with a pure-strategy Nash equilibrium. This contrasts with but complements previous results of under-dissipation when the number of rent seekers is uncertain. Our complete-dissipation result expands the range of circumstances consistent with association of an observed rent with social loss.

Suggested Citation

  • Kahana, Nava & Klunover, Doron, 2016. "Complete rent dissipation when the number of rent seekers is uncertain," Economics Letters, Elsevier, vol. 141(C), pages 8-10.
    • Handle: RePEc:eee:ecolet:v:141:y:2016:i:c:p:8-10
    DOI: 10.1016/j.econlet.2016.01.025
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    References listed on IDEAS

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    1. Nava Kahana & Doron Klunover, 2015. "A note on Poisson contests," Public Choice, Springer, vol. 165(1), pages 97-102, October.
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    9. Baye, Michael R & Kovenock, Dan & de Vries, Casper G, 1994. "The Solution to the Tullock Rent-Seeking Game When R Is Greater Than 2: Mixed-Strategy Equilibria and Mean Dissipation Rates," Public Choice, Springer, vol. 81(3-4), pages 363-380, December.
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    11. Roman M. Sheremeta, 2013. "Overbidding And Heterogeneous Behavior In Contest Experiments," Journal of Economic Surveys, Wiley Blackwell, vol. 27(3), pages 491-514, July.
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    14. Lim, Wooyoung & Matros, Alexander, 2009. "Contests with a stochastic number of players," Games and Economic Behavior, Elsevier, vol. 67(2), pages 584-597, November.
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    17. Arye L. Hillman, 2013. "Rent seeking," Chapters, in: William F. Shughart II & Laura Razzolini & Michael Reksulak (ed.), The Elgar Companion to Public Choice, Second Edition, chapter 19, pages 307-330, Edward Elgar Publishing.
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    Citations

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    Cited by:

    1. Heijnen, Pim & Schoonbeek, Lambert, 2019. "Rent-seeking with uncertain discriminatory power," European Journal of Political Economy, Elsevier, vol. 56(C), pages 103-114.
    2. Boris Ginzburg, 2021. "Optimal Price Of Entry Into A Competition," Economic Inquiry, Western Economic Association International, vol. 59(1), pages 280-286, January.
    3. Arye L. Hillman & Ngo Van Long, 2017. "Rent Seeking: The Social Cost of Contestable Benefits," CESifo Working Paper Series 6462, CESifo.
    4. Mikhail Drugov & Dmitry Ryvkin, 2019. "The shape of luck and competition in tournaments," Working Papers w0251, Center for Economic and Financial Research (CEFIR).
    5. Boosey, Luke & Brookins, Philip & Ryvkin, Dmitry, 2017. "Contests with group size uncertainty: Experimental evidence," Games and Economic Behavior, Elsevier, vol. 105(C), pages 212-229.
    6. Boosey, Luke & Brookins, Philip & Ryvkin, Dmitry, 2019. "Contests between groups of unknown size," Games and Economic Behavior, Elsevier, vol. 113(C), pages 756-769.
    7. Jiao, Qian & Ke, Changxia & Liu, Yang, 2022. "When to disclose the number of contestants: Theory and experimental evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 193(C), pages 146-160.
    8. Luke Boosey & Philip Brookins & Dmitry Ryvkin, 2020. "Information Disclosure in Contests with Endogenous Entry: An Experiment," Management Science, INFORMS, vol. 66(11), pages 5128-5150, November.
    9. Arye Hillman & Ngo Van Long, 2017. "The social cost of contestable benefits," CIRANO Working Papers 2017s-11, CIRANO.
    10. Luke Boosey & Philip Brookins & Dmitry Ryvkin, 2020. "Entry in group contests," Working Papers wp2020_02_01, Department of Economics, Florida State University.
    11. Drugov, Mikhail & Ryvkin, Dmitry, 2017. "Winner-Take-All Tournaments," CEPR Discussion Papers 12067, C.E.P.R. Discussion Papers.
    12. Ryvkin, Dmitry & Drugov, Mikhail, 2020. "The shape of luck and competition in winner-take-all tournaments," Theoretical Economics, Econometric Society, vol. 15(4), November.
    13. Dmitry Ryvkin & Mikhail Drugov, 2017. "Tournaments," Working Papers wp2017_03_02, Department of Economics, Florida State University.

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    More about this item

    Keywords

    Contests; Population uncertainty; Rent dissipation;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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