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This paper presents a general rent-seeking model in which participantsdecide on entry before choosing their levels of efforts. The conventionalwisdom in the rent-seeking literature suggests that the rent dissipationincreases with the number of potential participants and with theirproductivity of effort. In this paper, we show that this result of therent-seeking literature is far from general and applies only whenparticipants are relatively weak and enter the game with certainty. In thepresence of strong competitors, the expected total dissipation actuallydecreases, since participation in the game is less frequent. We furtherconsider the impact of competitors- exit option, distinguishing between\textquotedblright redistributive rent-seeking\textquotedblright\ and\textquotedblright productive rent-seeking\textquotedblright\ situations. Inredistributive rent-seeking, no social loss results from the fact that allcompetitors exit the race. In productive rent-seeking, instead, lack ofparticipation creates a social loss the \textquotedblright losttreasure\textquotedblright\ effect, since valuable rents are leftunexploited. We show that the lost-treasure effect perfectly counterbalancesthe reduction in rent dissipation due to competitors- exit. Hence, unlikeredistributive rent-seeking, in productive rent-seeking the total socialloss remains equal to the entire rent even when parties grow stronger or thenumber of players increases.

Item Type: MPRA Paper -

Institution: George Mason University School of Law-

Original Title: Crowding-out in productive and redistributive rent seeking-

Language: English-

Keywords: Rent-seeking; rent dissipation; Tullock-s paradox-

Subjects: K - Law and Economics > K0 - General > K00 - GeneralD - Microeconomics > D7 - Analysis of Collective Decision-Making > D72 - Political Processes: Rent-Seeking, Lobbying, Elections, Legislatures, and Voting BehaviorC - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C72 - Noncooperative Games-

Autor: Giuseppe, Dari-Mattiacci


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