Complete rent dissipation when the number of rent seekers is uncertain

Abstract

The focal question in the theory of rent seeking is the extent of rent dissipation as the indicator of social loss. In general, rent-seeking models assume that the number of contenders in a rent-seeking contest is known with certainty but, given the hidden nature of rent seeking, participants in rent seeking more usually can be expected to face an uncertain number of rivals. We show that, in a Tullock contest with a stochastic number of participants, complete ex-ante rent dissipation is consistent with a pure-strategy Nash equilibrium. This contrasts with but complements previous results of under-dissipation when the number of rent seekers is uncertain. Our complete-dissipation result expands the range of circumstances consistent with association of an observed rent with social loss.