DP5893 A Theory of Rent Seeking with Informational Foundations
|Author(s):||Johan N. M. Lagerlöf|
|Publication Date:||October 2006|
|Keyword(s):||competition, disclosure, information acquisition, rent seeking, welfare|
|JEL(s):||D42, D43, D72, D83, L13|
|Programme Areas:||Public Economics, Industrial Organization|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=5893|
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.