This is a contest or "lobbying game," in which each player chooses a lobbying "effort" that represents
real resources used in an attempt to obtain a prize (e.g. a broadcasting license). The prize value is a specified
dollar value, and the probability of obtaining the prize is equal to one's lobbying effort as a proportion
of the total effort for the group as a whole, as originally specified by Tullock. Rent seeking activity entails
real resource costs that dissipate the amount
of value transferred to the recipient of the prize.
A reduction in lobbying costs will typically increase the amount of lobbying
effort, which is the basis for the default class setup.
The experiment can be used to motivate a discussion
of the choice between non-market allocations and market allocations like auctions.
In advanced classes, the efforts can be compared with Nash/Cournot predictions.
Copyright 2009, Charles Holt, Please report problems and suggestions:
| || || || || ||For a hand-run setup done with playing cards, and associated suggestions for classroom discussion, see
Goeree and Holt (1999) "Rent Seeking and the Inefficiency of Non-Market Allocations,"
Vecon Lab - July 24, 2017