The Social Cost of Rent Seeking When Victories are Potentially Transient and Losses Final

Joerg Stephan and Heinrich Ursprung
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Joerg Stephan: Universit ät Konstanz

A chapter in 40 Years of Research on Rent Seeking 1, 2008, pp 443-454 from Springer

Abstract: Abstract Rents axe often contested in a setting of dynamic asymmetry: if one side loses, the game is over, but if the other side loses the contest will be refought in the future. We analyze this kind of dynamic asymmetry in order to establish associated rent dissipation, i.e. the expected social cost of contestability. One might conjecture that in rent-seeking games with such finality for one side, rent dissipation can be expected to be relatively small, since the duration of contestability is potentially shortened. We show, however, that an increase in dynamic asymmetry does not necessarily reduce the social cost of rent-seeking. This is encouraging in that asymmetric final settlements in many instances reflect politically unfair or even non-democratic institutional arrangements. An unpleasant trade-off between democracy and efficiency thus does not necessarily exist.

Date: 2008
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-540-79182-9_32

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DOI: 10.1007/978-3-540-79182-9_32

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