RENT DISSIPATION AND THE SOCIAL COST OF PRICE POLICY

Jay S. Coggins

No 271378, 1992 Annual Meeting, August 9-12, Baltimore, Maryland from American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association)

Abstract: How much will interest groups spend to secure favorable policies? This paper uses a general equilibrium-based exchange economy model to examine rent seeking for a price policy. Opposing interests spend resources to influence the government's choice of a price vector. This inherently strategic political struggle is modeled as a non-cooperative game. The level of the rent gained by participants is determined endogenously. Numerical simulations explore the degree to which rents are dissipated by wasteful rent seeking in Nash equilibrium. The leading finding is that dissipation, measured as the ratio of rent-seeking costs to rents garnered, can grow without limit, and is greatest when opponents are evenly matched. Dissipation is smallest with widely disparate groups, a result that might help explain the underdissipation that seems to occur in many industries.

Keywords: Demand and Price Analysis; Financial Economics; Public Economics (search for similar items in EconPapers)
Pages: 23
Date: 1992-08-09
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea92:271378

DOI: 10.22004/ag.econ.271378

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