Uncertain preassigned non-contestable and contestable rents

Nava Kahana and Shmuel Nitzan
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Nava Kahana: Bar-Han University

A chapter in 40 Years of Research on Rent Seeking 1, 1999, pp 455-471 from Springer

Abstract: Abstract Potential beneficiaries of government commitments often face the problem of guaranteeing that the commitments are carried out. For example, funds can be allocated via the budget, but not disbursed. The disbursement may be subject to the ambiguities of non-specified timing, or non-specified ‘appropriate ’ conditions. Potential beneficiaries then have incentives to undertake activities that affect the timing of disbursement of the prespecified funds. This paper studies the ensuing rent-seeking game against the uncertain behavior or discredibility of the government. We show that the resources expended by potential beneficiaries of government rents can be substantial, but they cannot exceed 30% of the preassigned rents. The extent of rent dissipation is incomplete and approaches unity for the critical value of government discredibility that still induces the individual to engage in rent-seeking. Contestability of the allocated funds - now referred to as contestable rents - increases the extent of rent-seeking outlays. Nevertheless, delayed uncertain contestable rents cannot be overdissipated.

Keywords: Contestability; Rent seeking; Rent dissipation; Discredibility (search for similar items in EconPapers)
JEL-codes: D72 (search for similar items in EconPapers)
Date: 1999
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DOI: 10.1007/978-3-540-79182-9_33

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