Rent seeking and the value of time

This paper focuses on the question of how rivals’ rent-seeking expenditures and investment expenditures are affected by the temporal dimension of those cash flows as well as the timing of the cash flow of monopoly rents. The paper applies methods from statistical reliability theory to derive five propositions establishing the conditions that must be satisfied if the rivals apportion their rent seeking and investment expenditures to maximize their certainty equivalents of the monopoly rent. The propositions explicate the responses of the rivals to changes in economic parameters characterizing the rent-seeking contest such as a change in the duration of the monopoly rent cash flow or a change in the number of rivals.     

Rent-seeking in a unionised monopoly

A unionised monopoly firm, benefitting from some kind of anti-competitive regulation, and its corresponding trade union have a common interest in spending resources to protect the monopoly rents created by the regulation. In the present paper, a situation in which the unionised monopoly is challenged by a consumer organisation fighting for deregulation is analysed as a standard Tullock rent-seeking contest. With unequal sharing of monopoly rents, the free-riding incentives among the rent-defending players turn out to be overwhelming, in the sense that the unique Nash equilibrium is characterised by zero effort contribution by the player with the lower valuation of the contested prize. This implies that being “strong”, in terms of bargaining strength, is not necessarily an advantage for neither player in a unionised monopoly that is threatened by deregulation. Received: June 2000 / accepted: January 2001     

Profit sharing with a contest among agents

We consider how an internal competition in the form of a contest among agents can be combined with profit sharing in team production. The principal can choose to share between the principal and the agents as well as the sharing rule with a competitive contest among the agents. We show that under some conditions, a pure strategy equilibrium of profit sharing exists. In equilibrium, internal sharing involves a contest that is more competitive than proportional sharing, and the principal can get higher profit compared to proportional sharing.     

City of Rents: The limits to the Barcelona model of urban competitiveness

The turn towards the knowledge‐based economy and creative strategies to enhance urban competitiveness within it has been well documented. Yet too little has been said to date about the transformation of land use for new productive activities, and the contradictions inherent to this process. Our case study is Barcelona, an erstwhile ‘model’ for urban regeneration which has sought to transform itself into a global knowledge city since 2000. Through the lens of Marxian value theory, and Harvey's writing on urban monopoly rents especially, we show how the 22@Barcelona project — conceived with received wisdom about the determinants of urban knowledge‐based competitiveness in mind — amounted to an exercise in the capture of monopoly rents, driven by the compulsion of public sector institutions, financiers and developers to pursue rental profit‐maximizing opportunities through the mobilization of land as a financial asset.     

Dynamic patterns in similarity-based cooperation: an agent-based investigation

Understanding what motivates and fosters collective actions has major implications in the governance and management of organizations, in the regulation and design of public policies, and has long attracted the interests of scholars and practitioners in business and economics. This paper deals with how groups of agents emerge in a dynamic contest characterized by lack of formal structure and uncertainty regarding the possible individual outcomes, focusing on the features of the cooperators and on the dynamics emerging among them. Through the development of a stylized agent-based model we start by showing how similarity in values can be a successful driver for cooperation but are also able to highlight the limits of such process, by looking at how and how much agents cooperate with similar others. A second-version of the model, where memory of past interactions has a role, introduces further dynamics and is able to create successful and relatively stable groups.     

Delegation and strategic incentives for managers in contests

Owners usually want their managers to maximize profits. As the literature on strategic delegation has shown it may be beneficial to owners to put a positive weight on sales in the optimal linear incentive scheme for managers to make them behave more aggressively in the market. This paper shows that if the competition between the managers can be characterized as a contest, owners may induce their managers to maximize sales. Moreover, there is a first‐mover advantage for owners when choosing their incentive schemes. If delegation is endogenous the type of contest will determine whether all owners delegate their decisions to managers or not. Copyright © 2002 John Wiley & Sons, Ltd.     

A process approach to understanding multiple open source innovation contests – Assessing the contest structures,execution, and participant responses in the android developer challenges

As organizations recognize the importance of open innovation, understanding emerging mechanisms for soliciting outside participation is a growing area of academic interest. Strategies can be as diverse as hosting innovation contests, sponsoring open source software (OSS) communities, or engaging in bilateral partnerships. While these have been studied as distinct strategies, more recent work has identified the possibility for combining these approaches, or deploying different methods at different times. Because each of these open innovation strategies are characterized by different incentive systems as well as different work and social practices, the combination of these can reveal unexpected participant responses (e.g., collaboration in innovation contests, competitive behavior in OSS communities). This study examines an explicit attempt to combine these strategies, to host an open source innovation contest. Through the case of Google's Android Developer Challenge, a series of multi-million dollar innovation contests used to launch an OSS community over several years, this study utilized a process approach to understanding open source innovation contests to understand how participants responded and also how the contest conditions changed over time. We found several practices of competition and collaboration that worked around the short term and long term incentives and constraints posed by the contest. We also followed the contest through various transition phases and found that participants reacted strongly to changes in structure, execution, and shifting conditions over time. Through this case, we extend our understanding of innovation contests as a process and specifically the promises and pitfalls of open source innovation contests.     

Corporate venturing and the rent cycle

This study views entrepreneurial rents as renewable opportunities and explores how firms can effectively utilize corporate venturing to create and sustain economic rents. Schumpeterian entrepreneurs create rents by harnessing corporate venturing to exploit attractive economic opportunities. The Schumpeterian rent is composed of Ricardian and Austrian rents. Ricardian rents result from unique and non-reproducible characteristics or competencies of the firm, and hence, are not appropriable by imitators. Conversely, Austrian rents, or economic profit, are subject to dissipation by imitators and attract entry by competitors or Austrian entrepreneurs until they are bid to zero or destroyed by another Schumpeterian innovation. In this formulation, Austrian entrepreneurs are modeled as infra-marginal rent seekers. Consequently, to sustain rents, firms must cycle between using corporate venturing to create or discover Schumpeterian entrepreneurial opportunities and using venturing as a mechanism to exploit existing rent generating opportunities.     

Innovation contests with temporary and endogenous monopoly rents

In this article, a Tullock contest success function is used to model an innovation contest with endogenous innovation height. We can prove stability for this endogenous prize contest. The winner of the contest gains a monopoly rent, which has two dimensions. In the first dimension the winning firm influences the innovation height. The second dimension is the life span of the temporary monopoly. This life span is determined by the contest designer, who can be asocial planner or the consumers. We find interior solutions in both cases, whereas consumers prefer a monopoly life span below the social optimum. Furthermore, the optimal number of firms in the contest is two.     

Contingent payments in selection contests

The early literature on research contests stressed the advantages of a fixed prize in inspiring R&D effort. More recently the focus has moved towards endogenizing the rewards to research activity in these tournament settings, since this can induce extra effort or enhance the surplus of the buyer. We focus on a research contest as a means of selecting a partner for an R&D enterprise, in an informational setting in which the established providers of R&D services know more about each others’ relative capabilities than does the buyer/sponsor. An alternative use of our model is in choosing between prospective patentees where the Patent Trading Office has less information on the patents than the competitors. This asymmetry creates a source of inefficiency if a rank order contest is used as a selection device; we show how the contest can be modified to improve selection efficiency, while maintaining its simplicity (as only ordinal information is required). The modification that we suggest involves endogenizing the prizes that are awarded contingent upon whether a contestant wins or loses the contest. Furthermore, the payment system and the selection mechanism are detail-free. This paper is part of the project “The Knowledge-Based Society” sponsored by the Research Council of Norway (project 172603/V10).     

产权住房选择性供给支持中的激励规制风险研究

在经济适用住房的供给中,政府通过土地划拨、价格规制等方式选择性支持中低收入人群解决住房问题。在拓展垄断产品供给的激励规制模型下,构建经济适用住房供给支持的激励规制模型,分析存在信息偏在和规制俘获情况下的政府激励规制风险。同时,给出最佳规制情况下政府为弥合信息偏在风险所支付的信息租金、高成本企业效率损失租金以及政府为维护社会公平风险所支付的公平租金,并基于此探讨我国经济适用住房政策未来的改革方向。     

Contests with endogenous deadlines

This paper analyzes the problem of a contest designer who chooses a starting time and a deadline of the contest to maximize discounted total effort by the contestants. Each contestant secretly decides how much effort to exert between the starting time and the deadline. At the deadline, the contestant who exerted most effort wins a prize, which consists of the endowment of the designer and collected interest. The contest has a unique Nash equilibrium. In the main model, the designer should announce the contest immediately with a short deadline to promote intense competition. I analyze how the optimal starting time and deadline change for a variable contest prize, different types of asymmetries, a Tullock lottery contest success function, and different goal functions of the designer.     

Resolution of Demand Uncertainty and Competitive Rent Adjustment

This article shows that even when the tenants can acquire the information about rents at no cost, it is possible to get rent dispersion if there is uncertainty about the demand in the market. The equilibrium with rent dispersion has the property that rents rise with the arrival of new tenants. However, even though identical units are offered at different rents, each unit generates zero expected profits. This is because a unit offered at a high rent has a smaller probability of being rented than does a unit offered at a lower rent. If demand uncertainty is resolved sequentially, then rents reveal an increasing trend through time because units with lower rents are rented before units with higher rents. Vacancies are also possible in the current model because some of the units with higher rents might not be rented depending on the realization of total demand in the market.     

Emotions in litigation contests

This paper introduces the concept of emotions into the standard litigation contest. Positive or negative emotions emerge when litigants either win or lose at trial and depend in particular on the level of defendant fault. Our findings establish that standard results of litigation contests change significantly when emotions are taken into account. We show that emotions may increase or decrease individual and total equilibrium contest effort, introduce an asymmetry into the contest, and reinforce or weaken a plaintiff’s incentives to bring a suit. In addition, we consider how emotions impact on justice.     

“Reverse” nested lottery contests

This paper proposes a multi-prize “reverse” nested lottery contest model, which can be viewed as the “mirror image” of the conventional nested lottery contest of  Clark and Riis (1996a). The reverse-lottery contest model determines winners by selecting losers based on contestants’ one-shot effort through a hypothetical sequence of lotteries. We provide a microfoundation for the reverse-lottery contest from a perspective of (simultaneous) noisy performance ranking and establish that the model is underpinned by a unique performance evaluation rule. We further demonstrate that the noisy-ranking model can be interpreted intuitively as a “worst-shot” contest, in which contestants’ performances are evaluated based on their most severe mistakes. The reverse-lottery contest model thus depicts a great variety of widely observed competitive activities of this nature. A handy closed-form solution for a symmetric equilibrium of the reverse-lottery contest is obtained. We show that the winner-take-all principle continues to hold in reverse-lottery contests. Moreover, we find that a reverse-lottery contest elicits more effort than a conventional lottery contest whenever the prizes available to contestants are relatively scarce.     

Saving the Commons in an Age of Plunder

Land ownership, as commonly understood today, originated with the enclosure movement during the English Tudor era almost four centuries ago. Karl Polanyi referred to this “propertization” of nature as the “great transformation.” That land, water, and air was a social commons is now archaic and forgotten, and with it the classical economic concept of rent, which was, in theory, once paid to royalty as the earth's guardian. Garrett Hardin's article, “The Tragedy of the Commons,” raised alarm about the abuse and loss of this realm, and he recommended constraints and privatization to prevent this. Most people view titles to landed property much as they do their household goods, but Henry George saw that the earth should be seen as a common resource and its value taxed to benefit everyone. This would restore economic equilibrium to market exchanges and pay for government services. The capture of natural resource rents can supplant taxes on wages and capital goods, and it comports with all textbook principles of sound tax theory. This policy can be the modern replacement for the commons, and implementing resource rent capture is both economically and technically feasible.     

Tullock and Hirshleifer: a meeting of the minds

We introduce the serial contest by building on the desirable properties of two prominent contest games. This family of contest games relies both on relative efforts (as Tullock’s proposal) and on absolute effort differences (as difference-form contests). An additional desirable feature is that the serial contest is homogeneous of degree zero in contestants’ efforts. The family is characterized by a parameter representing how sensitive the outcome is to contestants’ efforts. It encompasses as polar cases the (fair) lottery and the (deterministic) all-pay auction. Equilibria have a close relationship to those of the (deterministic) all-pay auction and important properties of the latter hold for the serial contest, too.      

On Market Structure and the Taxation of Exhaustible Resources:

A bstract . The older static theory of the taxation of exhaustible resources is distinguished from the modern theory based on the work of Harold Hotelling Both advocate some form of a profits-based tax , which is appropriate for conditions of perfect competition. But an oligopolistic market structure has additional quasi-rents which could be captured through taxation. It is argued that a sales tax will not only capture the rents but also lower the cut-off grade of the ore mined.     

Rent Capitalization and Transportation Infrastructure Development in Jakarta

Using Jakarta, Indonesia as a case study, we evaluate the degree to which proximity to freeway interchanges gets capitalized into office rents, controlling for factors like regional accessibility. The research shows strong capitalization effects, with rent premiums decaying exponentially with distances from freeway access points. It also shows that office rents are a stronger function of distance to Jakarta's historical center, Monas, than a gravity-based measure of accessibility to upper-income households. Thus, a monocentric measure of location explained variation in office rents better than a polycentric measure of proximity to labor markets. While value capture principles are attractive in theory, implementation is particularly difficult in developing countries like Indonesia. Jakarta's own betterment tax program has been plagued by poor administration and enforcement. We argue that shifting betterment tax financing away from a focus on residential properties to high-end office and commercial land uses would likely yield higher rates of return and be far easier to implement.     

Natural resource rents and internal conflicts: Can decentralization lift the curse?

We study how natural resource rents affect the risk of internal conflict within countries and how the federal structure of countries influences this relationship. Natural resource abundance may induce excessive rent-seeking and thus increase the risk of internal conflict. Fiscal and political decentralization as an institutional arrangement for rent-sharing and political codetermination of regions within a country may limit the destructive effect of natural resource rents on internal stability. Using cross-country and panel data from more than 90 countries covering the period 1984–2004, we find evidence that natural resource rents indeed increase the risk of internal conflict, but this relationship is significantly mitigated by political decentralization.