Rent dissipation in simple Tullock contests

Dickson, Alex and MacKenzie, Ian A. and Sekeris, Petros G. (2022) Rent dissipation in simple Tullock contests. Games, 13 (6). 83. ISSN 2073-4336 (https://doi.org/10.3390/g13060083)

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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.

ORCID iDs

Dickson, Alex ORCID logoORCID: https://orcid.org/0000-0001-9386-9036, MacKenzie, Ian A. and Sekeris, Petros G.;