Rent-Seeking Behavior in the Long Run
The original work on rent-seeking conjectured that rent-seeking expenditures would completely dissipate the rent sought. Tullock (1980) using a game-theoretic approach with a Cournot-Nash (C-N) response function showed that total expenditures can be greater than, equal to, or less than the rent payoff depending on the number of players and the marginal cost of influencing the probability of winning. Corcoran (1983) extended Tullock’s model to a long-run setting, i.e., free entry, and found that under these conditions rents will be dissipated. Tullock (1983) agreed in part, but still maintained that where marginal costs were rapidly falling or rising throughout, Corcoran’s long-run solution does not pertain.
KeywordsReservation Price Expected Profit Expected Loss Aggregate Expenditure Potential Entrant
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