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Two-Dimensional Effort in Patent-Race Games and Rent-Seeking Contests: The Case of Telephony

Listed author(s):
  • João Ricardo Faria

    ()

    (MPA Program, University of Texas at El Paso, El Paso, TX 79968, USA)

  • Franklin G. Mixon, Jr.

    ()

    (Center for Economic Education, Columbus State University, Columbus, GA 31907, USA)

  • Steven B. Caudill

    ()

    (Department of Economics, Rhodes College, Memphis, TN 38112, USA)

  • Samantha J. Wineke

    ()

    (Department of Economics, Rhodes College, Memphis, TN 38112, USA)

Using the political-economic history of the development of telephony during the 1870s as a backdrop, this paper studies a two-player Tullock contest that includes both research effort (R&D) and legal effort ( i.e. , rent-seeking effort). The two types of efforts complement each other and positively influence the payoff of the contest. We assume that legal effort affects the prize value, increasing the winner’s prospective rents, and research effort impacts the probability of winning the contest. The results of the model break new ground in showing that research effort is a function of legal effort, wherein research effort increases with rent-seeking effort. The model also shows the existence of a strategic equivalence between rent seeking and patent races.

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Article provided by MDPI, Open Access Journal in its journal Games.

Volume (Year): 5 (2014)
Issue (Month): 2 (May)
Pages: 1-11

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Handle: RePEc:gam:jgames:v:5:y:2014:i:2:p:116-126:d:36267
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  1. Gil Epstein & Shmuel Nitzan & Mordechai Schwarz, 2008. "Efforts in two-sided contests," Public Choice, Springer, vol. 136(3), pages 283-291, September.
  2. 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.
  3. Subhasish Chowdhury & Roman Sheremeta, 2011. "A generalized Tullock contest," Public Choice, Springer, vol. 147(3), pages 413-420, June.
  4. Maria Arbatskaya & Hugo M. Mialon, 2012. "Dynamic Multi-Activity Contests," Scandinavian Journal of Economics, Wiley Blackwell, vol. 114(2), pages 520-538, June.
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  7. Kiefer, Nicholas M, 1988. "Economic Duration Data and Hazard Functions," Journal of Economic Literature, American Economic Association, vol. 26(2), pages 646-679, June.
  8. Dan Kovenock & Michael R. Baye & Casper G. de Vries, 1996. "The all-pay auction with complete information (*)," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 8(2), pages 291-305.
  9. Derek J. Clark & Kai A. Konrad, 2007. "Contests with Multi-tasking," Scandinavian Journal of Economics, Wiley Blackwell, vol. 109(2), pages 303-319, June.
  10. Perez-Castrillo, J David & Verdier, Thierry, 1992. "A General Analysis of Rent-Seeking Games," Public Choice, Springer, vol. 73(3), pages 335-350, April.
  11. Pelosse, Yohan, 2011. "Equivalence of optimal noisy-ranking contests and Tullock contests," Journal of Mathematical Economics, Elsevier, vol. 47(6), pages 740-748.
  12. Glenn C. Loury, 1979. "Market Structure and Innovation," The Quarterly Journal of Economics, Oxford University Press, vol. 93(3), pages 395-410.
  13. Baye, M.R. & Kovenock, D. & De Vries, C.G., 1993. "The Solution to the Tullock Rent-Seeking Game when R > 2: Mixed Strategy Equilibria and Mean Dissipation Rates," Papers 10-93-9, Pennsylvania State - Department of Economics.
  14. 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.
  15. Baye, M.R. & Kovenock, D. & De Vries, C.G., 1993. "The Solution to the Tullock Rent-Seeking Game when R > 2: Mixed Strategy Equilibria and Mean Dissipation Rates," Papers 10-93-9, Pennsylvania State - Department of Economics.
  16. Farmer, Amy & Pecorino, Paul, 1999. "Legal Expenditure as a Rent-Seeking Game," Public Choice, Springer, vol. 100(3-4), pages 271-288, September.
  17. Dixit, Avinash K, 1987. "Strategic Behavior in Contests," American Economic Review, American Economic Association, vol. 77(5), pages 891-898, December.
  18. Baye, Michael R. & Hoppe, Heidrun C., 2003. "The strategic equivalence of rent-seeking, innovation, and patent-race games," Games and Economic Behavior, Elsevier, vol. 44(2), pages 217-226, August.
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