The solution to the Tullock rent-seeking game when R > 2: mixed-strategy equilibria and mean dissipation rates
In Tullock's rent-seeking model, the probability a player wins the game depends on expenditures raised to the power R. We show that a symmetric mixed-strategy Nash equilibrium exists when R>2, and that overdissipation of rents does not arise in any Nash equilibrium. We derive a tight lower bound on the level of rent dissipation that arises in a symmetric equilibrium when the strategy space is discrete, and show that full rent dissipation occurs when the strategy space is continuous. Our results are shown to be consistent with recent experimental evidence on the dissipation of rents. An earlier version of this paper circulated under the title, No, Virginia, There is No Overdissipation of Rents. We are grateful to Dave Furth and Frans van Winden for stimulating conversations, and for comments provided by workshop participants from the CORE-ULB-KUL IUAP project, Purdue University, Pennsylvania State University, Rijksuniversiteit Limburg, and Washington State University. We also thank Max van de Sande Bakhuyzen and Ben Heijdra for useful discussions, and Geert Gielens for computational assistance. An earlier version of the paper was presented at the ESEM 1992 in Brussels and the Mid-West Mathematical Economics Conference in Pittsburgh. All three authors would like to thank CentER for its hospitality during the formative stages of the paper. The second author has also benefited from the financial support of the Katholieke Universitieit Leuven and the Jay N. Ross Young Faculty Scholar Award at Purdue University. The third author benefitted from visiting IGIER where part of the paper was written. The third author also benefitted from grant IUAP 26 of the Belgian Government.
|Keywords||Nash equilibrium, Tullock, dissipation rates, equilibrium theory, rent seeking|
|Persistent URL||dx.doi.org/10.1007/BF01053238, hdl.handle.net/1765/12413|
Baye, M.R., Kovenock, D., & de Vries, C.G.. (1994). The solution to the Tullock rent-seeking game when R > 2: mixed-strategy equilibria and mean dissipation rates. Public Choice, 81(3-4), 363–380. doi:10.1007/BF01053238