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A Theory of Rent Seeking with Informational Foundations

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Abstract

I develop a model of rent seeking with informational foundations and an arbitrary number of rent seekers, and I compare the results with Tullock's (1980) classic model where the influence activities are "black-boxed." Given the microfoundations, the welfare consequences of rent seeking can be studied. In particular, I show that competition among rent seekers can be socially beneficial, since the additional information that the decision maker gets access to makes the increase in rent-seeking expenditures worthwhile. However, the analysis also highlights a logic that, under natural parameter assumptions, makes the rent seekers spend more resources on rent seeking than is in society's interest, which is consistent with the spirit of the rent-seeking literature.

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  • Johan N.M. Lagerlöf, 2006. "A Theory of Rent Seeking with Informational Foundations," Royal Holloway, University of London: Discussion Papers in Economics 06/04, Department of Economics, Royal Holloway University of London, revised Sep 2006.
    • Handle: RePEc:hol:holodi:0604
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    1. repec:bla:kyklos:v:28:y:1975:i:4:p:745-62 is not listed on IDEAS
    2. Lagerlof, Johan N.M. & Heidhues, Paul, 2005. "On the desirability of an efficiency defense in merger control," International Journal of Industrial Organization, Elsevier, vol. 23(9-10), pages 803-827, December.
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    11. Morten Bennedsen & Sven E. Feldmann, 2002. "Lobbying Legislatures," Journal of Political Economy, University of Chicago Press, vol. 110(4), pages 919-948, August.
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    13. Tirole, Jean, 1986. "Procurement and Renegotiation," Journal of Political Economy, University of Chicago Press, vol. 94(2), pages 235-259, April.
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    15. Austen-Smith, David, 1995. "Campaign Contributions and Access," American Political Science Review, Cambridge University Press, vol. 89(3), pages 566-581, September.
    16. Nitzan, Shmuel, 1994. "Modelling rent-seeking contests," European Journal of Political Economy, Elsevier, vol. 10(1), pages 41-60, May.
    17. Potters, Jan & van Winden, Frans, 1992. "Lobbying and Asymmetric Information," Public Choice, Springer, vol. 74(3), pages 269-292, October.
    18. Gary S. Becker, 1983. "A Theory of Competition Among Pressure Groups for Political Influence," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 98(3), pages 371-400.
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    Cited by:

    1. Stergios Skaperdas & Samarth Vaidya, 2012. "Persuasion as a contest," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 51(2), pages 465-486, October.
    2. Etienne Farvaque & Gael Lagadec, 2009. "Electoral Control when Policies are for Sale," CESifo Working Paper Series 2522, CESifo.
    3. Martin Gregor, 2011. "Corporate lobbying: A review of the recent literature," Working Papers IES 2011/32, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Nov 2011.

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    More about this item

    Keywords

    Rent seeking; competition; lobbying; information acquisition; disclosure; welfare;
    All these keywords.

    JEL classification:

    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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