RENT DISSIPATION WHEN RENT SEEKERS ARE BUDGET CONSTRAINED

In the original Tullock (1975, 1980) game, an individual bidder's prob ability of winning with a bid b is proportional to b(R), where the exp onent reflects economies of scale in rent seeking. Different interpret ations can be given to these probabilities. First, one may view R as a reflection of the political culture. Alternatively, one may view R as a choice variable for a politician. Intuition suggests that a society with a high tolerance for the selling of political favors and politic ians who are receptive to rent seeking would both induce greater rent- seeking expenditures than other societies, all else equal. This paper shows that a lower value of R can actually lead to more rent dissipati on than a higher value. This paper also reinforces two points concerni ng rent seeking. First, the analysis confirms the robustness of under- dissipation of rents, even in the face of entry. Second, it points out the importance of distinguishing between rent-seeking expenditures an d rent dissipation. When bidders must borrow, for example, total expen diture may understate rent dissipation.