10 Questions
What did Posner (1975) describe in his rent-seeking contest model?
A constant-cost game where the probability of winning was proportional to investment
In the context of rent seeking, what did Posner assume about the bidders in his model?
They were risk-neutral
What is a key characteristic of rent-seeking costs according to the text?
Rent-seeking costs generally do not arise in private, competitive processes
In the context of rent-seeking contests, what does 'exact dissipation' refer to?
All available rents being exactly dissipated among the bidders
What was the main hypothesis presented by Posner in his rent-seeking contest model?
The probability of winning was proportional to the investment made by the bidders
What type of bidders did Posner assume in his model?
Risk-neutral bidders
What was the value of the available rents in Posner's rent-seeking contest model?
$100,000
'Exact dissipation' in rent-seeking contests implies that:
All available rents are fully utilized by the bidders
According to Posner's model, what is the relationship between investment and probability of winning in a rent-seeking contest?
Proportional
Why did Posner consider risk-neutral bidders in his rent-seeking contest model?
To simplify the analysis and calculations
Explore the concept of economic rent seeking and its impact on social cost. Learn how resources used for transfer seeking can have a positive opportunity cost in the economy. Understand why rent seeking activities may lead to negative-sum outcomes.
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