Prices versus quantities with distributional rent seeking

Ian MacKenzie

No 548, Discussion Papers Series from University of Queensland, School of Economics

Abstract: This article investigates prices versus quantities when regulation generates contestable rents. A two-stage process is outlined where, in stage one, a politician selects a policy level in the presence of uncertainty. In stage two, players invest in distributional rent seeking, i.e., rent-capturing activities to obtain the rents generated from regulation. A clear distinction is derived between prices, revenue-raising quantities as well as non-revenue-raising quantities. The politician’s payoff as well as equilibrium policy level are compared within a number of institutional environments, which take into account the politician’s preferences over rent-seeking transfers and social welfare. A key determinant is the interaction between the efficiency of rent transfer and the composition of rent seekers within the economy.

Keywords: prices; quantities; rent seeking (search for similar items in EconPapers)
JEL-codes: D72 D81 Q52 Q58 (search for similar items in EconPapers)
Date: 2015-07-06
New Economics Papers: this item is included in nep-reg
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Persistent link: https://EconPapers.repec.org/RePEc:qld:uq2004:548

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