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Rent Seeking and Market Competition

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  • Zhou, Huizhong

Abstract

This paper emphasizes that political behavior of interest groups is a result of economic calculation, and therefore is affected by the market conditions under which they operate. We develop a two-stage game to link political and market decision-making. We find that if unproductive rent-seeking directly contributes to rent-seekers' market operations, then their lobbying efforts will be excessive if the number of outsiders is relatively large, restrained if it is relatively small. If rent-seeking directly impairs rent-seekers' market operations, the above described behavior will be reversed. The analysis also reveals that as wasteful rent-seeking may increase rent-seeker's production cost, market competition shifts production from now less efficient rent-seekers to their non-rent-seeking rivals. Welfare gains from this shift may overshadow the direct waste of influence activities. Copyright 1995 by Kluwer Academic Publishers

Suggested Citation

  • Zhou, Huizhong, 1995. "Rent Seeking and Market Competition," Public Choice, Springer, vol. 82(3-4), pages 225-241, March.
    • Handle: RePEc:kap:pubcho:v:82:y:1995:i:3-4:p:225-41
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    Cited by:

    1. Sami Fethi & Hatice Imamoglu, 2021. "The impact of rent‐seeking on economic growth in the six geographic regions: Evidence from static and dynamic panel data analysis," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(4), pages 5349-5362, October.
    2. Zeeshan Noor Siddiqui, 2017. "Understanding the Linkage among Public Procurement (PP), Corruption, and Tax Morale (TM) Through Agency Theory (AT): A Review," Business & Economic Review, Institute of Management Sciences, Peshawar, Pakistan, vol. 9(3), pages 258-288, September.
    3. Kjell Hausken, 1995. "Intra-Level and Inter-Level Interaction," Rationality and Society, , vol. 7(4), pages 465-488, October.

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