Uncertain preassigned non-contestable and contestable rents

Potential beneficiaries of government commitments often face the problem of guaranteeing that the commitments are carried out. For example, funds can be allocated via the budget, but not disbursed, The disbursement may be sub ject to the ambiguities of non-specified timing, or non-specified 'appropri ate' conditions. Potential beneficiaries then have incentives to undertake activities that affect the timing of disbursement of the prespecified funds . This paper studies the ensuing rent-seeking game against the uncertain be havior or discredibility of the government. We show that the resources expe nded by potential beneficiaries of government rents can be substantial, but they cannot exceed 30% of the preassigned rents. The extent of rent dissip ation is incomplete and approaches unity for the critical value of governme nt discredibility that still induces the individual to engage in rent-seeki ng. Contestability of the allocated funds - now referred to as contestable rents - increases the extent of rent-seeking outlays. Nevertheless, delayed uncertain contestable rents cannot be overdissipated. (C) 1999 Elsevier Sc ience B.V. All rights reserved. JEL classification: D72.