The Incidence of Overdissipation in Rent-Seeking Contests

Michael Baye, Dan Kovenock and Casper de Vries

Public Choice, 1999, vol. 99, issue 3-4, 439-54

Abstract: Gordon Tullock's analysis of rent seeking and overdissipation is reconsidered. The authors show that, while equilibrium strategies do not permit overdissipation in expectation, for particular realizations of players' mixed strategies the total amount spent competing for rents can exceed the value of the prize. They also show that the cross-sectional incidence of overdissipation in the perfectly discriminating contest ranges from 0.50 to 0.44 as the number of players increases from two to infinity. Thus, even though the original analysis of overdissipation is flawed, there are instances in which rentseekers spend more than the prize is worth. Copyright 1999 by Kluwer Academic Publishers

Date: 1999
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