IDEAS home Printed from https://ideas.repec.org/a/gam/jgames/v13y2022i6p83-d1001591.html
   My bibliography  Save this article

Rent Dissipation in Simple Tullock Contests

Author

Listed:
  • Alex Dickson

    (Department of Economics, University of Strathclyde, Glasgow G4 0QU, UK)

  • Ian A. MacKenzie

    (School of Economics, University of Queensland, Brisbane 4072, Australia)

  • Petros G. Sekeris

    (Economics and Finance, TBS Business School, Toulouse, 1 Place Jourdain, 31000 Toulouse, France)

Abstract

We investigate observed rent dissipation—the ratio of the total costs of rent seeking to the monetary value of the rent—in winner-take-all and share contests, where preferences are more general than usually assumed in the literature. With concave valuation of the rent, we find that contests can exhibit observed over-dissipation if the contested rent is below a threshold and yet observed under-dissipation with large rents: the nature of preferences implies contestants are relatively effortful in contesting small rents. Considering more general preferences in contests thus allows us to reconcile the Tullock paradox—where rent-seeking levels are relatively small despite the contested rent being sizeable—with observed over-dissipation of rents in experimental settings, where contested rents are arguably small.

Suggested Citation

  • Alex Dickson & Ian A. MacKenzie & Petros G. Sekeris, 2022. "Rent Dissipation in Simple Tullock Contests," Games, MDPI, vol. 13(6), pages 1-11, December.
  • Handle: RePEc:gam:jgames:v:13:y:2022:i:6:p:83-:d:1001591
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2073-4336/13/6/83/pdf
    Download Restriction: no

    File URL: https://www.mdpi.com/2073-4336/13/6/83/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Robin Boadway & Katherine Cuff & Maurice Marchand, 2000. "Optimal Income Taxation With Quasi‐Linear Preferences Revisited," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 2(4), pages 435-460, October.
    2. Dickson, Alex & MacKenzie, Ian A. & Sekeris, Petros G., 2018. "Rent-seeking incentives in share contests," Journal of Public Economics, Elsevier, vol. 166(C), pages 53-62.
    3. Paan Jindapon & Christopher Whaley, 2015. "Risk lovers and the rent over-investment puzzle," Public Choice, Springer, vol. 164(1), pages 87-101, July.
    4. John Duggan & Jacque Gao, 2020. "Lobbying as a multidimensional tug of war," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 54(1), pages 141-166, January.
    5. Schroyen, Fred & Treich, Nicolas, 2016. "The power of money: Wealth effects in contests," Games and Economic Behavior, Elsevier, vol. 100(C), pages 46-68.
    6. Emmanuel Dechenaux & Dan Kovenock & Roman Sheremeta, 2015. "A survey of experimental research on contests, all-pay auctions and tournaments," Experimental Economics, Springer;Economic Science Association, vol. 18(4), pages 609-669, December.
    7. Cason, Timothy N. & Masters, William A. & Sheremeta, Roman M., 2020. "Winner-take-all and proportional-prize contests: Theory and experimental results," Journal of Economic Behavior & Organization, Elsevier, vol. 175(C), pages 314-327.
    8. Arye L. Hillman & John G. Riley, 1989. "Politically Contestable Rents And Transfers," Economics and Politics, Wiley Blackwell, vol. 1(1), pages 17-39, March.
    9. Chowdhury, Subhasish M. & Sheremeta, Roman M. & Turocy, Theodore L., 2014. "Overbidding and overspreading in rent-seeking experiments: Cost structure and prize allocation rules," Games and Economic Behavior, Elsevier, vol. 87(C), pages 224-238.
    10. Boadway, Robin & Cuff, Katherine & Marchand, Maurice, 2000. "Optimal Income Taxation with Quasi-linear Preferences Revisited," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 2(4), pages 435-460.
    11. Nicolas Treich, 2010. "Risk-aversion and prudence in rent-seeking games," Public Choice, Springer, vol. 145(3), pages 339-349, December.
    12. Singh, Prakarsh & Masters, William A., 2020. "Performance bonuses in the public sector: Winner-take-all prizes versus proportional payments to reduce child malnutrition in India," Journal of Development Economics, Elsevier, vol. 146(C).
    13. Gil S. Epstein & Shmuel Nitzan, 2007. "Endogenous Public Policy and Contests," Springer Books, Springer, number 978-3-540-74818-2, September.
    14. Cason, Timothy N. & Masters, William A. & Sheremeta, Roman M., 2010. "Entry into winner-take-all and proportional-prize contests: An experimental study," Journal of Public Economics, Elsevier, vol. 94(9-10), pages 604-611, October.
    15. Mauro, Paolo, 1998. "Corruption and the composition of government expenditure," Journal of Public Economics, Elsevier, vol. 69(2), pages 263-279, June.
    16. Terrance Hurley, 1998. "Rent dissipation and efficiency in a contest with asymmetric valuations," Public Choice, Springer, vol. 94(3), pages 289-298, March.
    17. Konrad, Kai A & Schlesinger, Harris, 1997. "Risk Aversion in Rent-Seeking and Rent-Augmenting Games," Economic Journal, Royal Economic Society, vol. 107(445), pages 1671-1683, November.
    18. Michael P. Keane, 2011. "Labor Supply and Taxes: A Survey," Journal of Economic Literature, American Economic Association, vol. 49(4), pages 961-1075, December.
    19. Heinrich W. Ursprung, 1990. "Public Goods, Rent Dissipation, And Candidate Competition," Economics and Politics, Wiley Blackwell, vol. 2(2), pages 115-132, July.
    20. Chung, Tai-Yeong, 1996. "Rent-Seeking Contest When the Prize Increases with Aggregate Efforts," Public Choice, Springer, vol. 87(1-2), pages 55-66, April.
    21. Nava Kahana & Doron Klunover, 2015. "A note on Poisson contests," Public Choice, Springer, vol. 165(1), pages 97-102, October.
    22. Richard Cornes & Roger Hartley, 2012. "Risk aversion in symmetric and asymmetric contests," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 51(2), pages 247-275, October.
    23. Hillman, Arye L & Katz, Eliakim, 1984. "Risk-Averse Rent Seekers and the Social Cost of Monopoly Power," Economic Journal, Royal Economic Society, vol. 94(373), pages 104-110, March.
    24. Roland Hodler, 2007. "Rent seeking and aid effectiveness," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 14(5), pages 525-541, October.
    25. MacKenzie, Ian A. & Ohndorf, Markus, 2012. "Cap-and-trade, taxes, and distributional conflict," Journal of Environmental Economics and Management, Elsevier, vol. 63(1), pages 51-65.
    26. Baye, Michael R & Kovenock, Dan & de Vries, Casper G, 1999. "The Incidence of Overdissipation in Rent-Seeking Contests," Public Choice, Springer, vol. 99(3-4), pages 439-454, June.
    27. Lim, Wooyoung & Matros, Alexander, 2009. "Contests with a stochastic number of players," Games and Economic Behavior, Elsevier, vol. 67(2), pages 584-597, November.
    28. J. A. Mirrlees, 1971. "An Exploration in the Theory of Optimum Income Taxation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 38(2), pages 175-208.
    29. Ian A. MacKenzie, 2017. "Rent creation and rent seeking in environmental policy," Public Choice, Springer, vol. 171(1), pages 145-166, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Sung-Hoon Park & Chad E. Settle, 2023. "Asymmetric Reimbursement and Contingent Fees in Environmental Conflicts: Observable vs. Unobservable Contracts," Games, MDPI, vol. 14(4), pages 1-10, July.
    2. Theofanis Tsoulouhas, 2023. "Advances in the Theory and Applications of Contests and Tournaments: Introduction to the Special Issue," Games, MDPI, vol. 14(2), pages 1-3, March.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Alex Dickson & Ian MacKenzie & Petros G Sekeris, 2020. "Rent dissipation in share contests," Working Papers 2014, University of Strathclyde Business School, Department of Economics.
    2. Emmanuel Dechenaux & Dan Kovenock & Roman Sheremeta, 2015. "A survey of experimental research on contests, all-pay auctions and tournaments," Experimental Economics, Springer;Economic Science Association, vol. 18(4), pages 609-669, December.
    3. Dickson, Alex & MacKenzie, Ian A. & Sekeris, Petros G., 2018. "Rent-seeking incentives in share contests," Journal of Public Economics, Elsevier, vol. 166(C), pages 53-62.
    4. Sheremeta, Roman, 2014. "Behavior in Contests," MPRA Paper 57451, University Library of Munich, Germany.
    5. Liqun Liu & Nicolas Treich, 2021. "Optimality of winner-take-all contests: the role of attitudes toward risk," Journal of Risk and Uncertainty, Springer, vol. 63(1), pages 1-25, August.
    6. Roman M. Sheremeta, 2014. "Behavioral Dimensions of Contests," Working Papers 14-14, Chapman University, Economic Science Institute.
    7. David Bruner & Caleb Cox & David M. McEvoy & Brock Stoddard, 2022. "Strategic thinking in contests," Experimental Economics, Springer;Economic Science Association, vol. 25(3), pages 942-973, June.
    8. Alex Dickson & Ian A. MacKenzie & Petros G. Sekeris, 2016. "Sharing contests with general preferences," Discussion Papers Series 573, School of Economics, University of Queensland, Australia.
    9. Curtis R. Price & Roman M. Sheremeta, 2015. "Endowment Origin, Demographic Effects, and Individual Preferences in Contests," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 24(3), pages 597-619, September.
    10. Jean-Daniel Guigou & Bruno Lovat & Nicolas Treich, 2017. "Risky rents," Economic Theory Bulletin, Springer;Society for the Advancement of Economic Theory (SAET), vol. 5(2), pages 151-164, October.
    11. Arye L. Hillman & Ngo Van Long, 2017. "Rent Seeking: The Social Cost of Contestable Benefits," CESifo Working Paper Series 6462, CESifo.
    12. Shupp, Robert & Sheremeta, Roman M. & Schmidt, David & Walker, James, 2013. "Resource allocation contests: Experimental evidence," Journal of Economic Psychology, Elsevier, vol. 39(C), pages 257-267.
    13. Paul Pecorino, 2016. "Individual welfare and the group size paradox," Public Choice, Springer, vol. 168(1), pages 137-152, July.
    14. Konrad, Kai A., 2007. "Strategy in contests: an introduction [Strategie in Turnieren – eine Einführung]," Discussion Papers, Research Unit: Market Processes and Governance SP II 2007-01, WZB Berlin Social Science Center.
    15. Francesco Fallucchi & Jan Niederreiter & Massimo Riccaboni, 2021. "Learning and dropout in contests: an experimental approach," Theory and Decision, Springer, vol. 90(2), pages 245-278, March.
    16. Roman M. Sheremeta, 2013. "Overbidding And Heterogeneous Behavior In Contest Experiments," Journal of Economic Surveys, Wiley Blackwell, vol. 27(3), pages 491-514, July.
    17. Brookins, Philip & Jindapon, Paan, 2021. "Risk preference heterogeneity in group contests," Journal of Mathematical Economics, Elsevier, vol. 95(C).
    18. Arye Hillman & Ngo Van Long, 2017. "The social cost of contestable benefits," CIRANO Working Papers 2017s-11, CIRANO.
    19. Hoffmann, Magnus & Kolmar, Martin, 2017. "Distributional preferences in probabilistic and share contests," Journal of Economic Behavior & Organization, Elsevier, vol. 142(C), pages 120-139.
    20. Subhasish M. Chowdhury & Patricia Esteve‐González & Anwesha Mukherjee, 2023. "Heterogeneity, leveling the playing field, and affirmative action in contests," Southern Economic Journal, John Wiley & Sons, vol. 89(3), pages 924-974, January.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jgames:v:13:y:2022:i:6:p:83-:d:1001591. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.