Tullock Rent-Seeking Contest and its Solution in Secure Strategies
The paper provides a framework for analysis of optimal growth enhancing policy in the economy with market and government failures. It develops an endogenous growth model with strategic complementarities between R&D investments of firms and investments in training of households. The model generates two possible long-run equilibriums: no-growth poverty trap equilibrium and stable sustainable growth equilibrium. In the extended version of the model with government failures we assume that some part of government revenue is expropriated by rent seeking agents. With these conditions we analyze the possibility of transition from stagnation to growth induced by government investment subsidies and other factors.
A new concept of equilibrium in secure strategies (EinSS) in non-cooperative games is presented. The EinSS coincides with the Nash Equilibrium when Nash Equilibrium exists and postulates the incentive of players to maximize their profit under the condition of security against actions of other players. The new concept is illustrated by a number of matrix game examples and compared with
other closely related theoretical models. We prove the existence of equilibrium in secure strategies in two classic games that fail to have Nash equilibria. On an infinite line we obtain the solution in secure strategies of the classic Hotelling’s price game (1929) with a restricted reservation price and linear transportation costs. New type of monopolistic equilibria in secure strategies are discovered in the Tullock Contest (1967, 1980) of two players.
We describe optimal contest success functions (CSF) which maximize expected revenues of an administrator who allocates under informational asymmetry a source of rent among competing bidders. It is shown that in the case of independent private values rent administrator’s optimal mechanism can always be implemented via some CSFs as posited by Tullock. Optimal endogenous CSFs have properties which are often assumed a priori as plausible features of rent-seeking contests; the paper therefore validates such assumptions for a broad class of contests. Various extensions or optimal CSFs are analyzed.
In Russia, rent seeking has involved violence and control of the judiciary. State agencies that formally should protect the state have been used to extract rents through means that are in principle illegal. The end of effective political competition resulted in corruption and expansion of administratively extracted rents. The rent extraction extends throughout the layers of government bureaucracy and local and national levels of government. We provide examples in which rent extraction reaches the individual, through traffic police and a market for academic degrees.
We consider a model of location-price competition between two firms, located on the circle. Nash equilibrium, equilibrium in secure strategies, and Nash-2 equilibrium are compared. We demonstrate that Nash-2 equilibrium exists for any locations of firms. The set of Nash-2 equilibria is treated as tacit collusion.
Smoking is a problem, bringing signifi cant social and economic costs to Russiansociety. However, ratifi cation of the World health organization Framework conventionon tobacco control makes it possible to improve Russian legislation accordingto the international standards. So, I describe some measures that should be taken bythe Russian authorities in the nearest future, and I examine their effi ciency. By studyingthe international evidence I analyze the impact of the smoke-free areas, advertisementand sponsorship bans, tax increases, etc. on the prevalence of smoking, cigaretteconsumption and some other indicators. I also investigate the obstacles confrontingthe Russian authorities when they introduce new policy measures and the public attitudetowards these measures. I conclude that there is a number of easy-to-implementanti-smoking activities that need no fi nancial resources but only a political will.
One of the most important indicators of company's success is the increase of its value. The article investigates traditional methods of company's value assessment and the evidence that the application of these methods is incorrect in the new stage of economy. So it is necessary to create a new method of valuation based on the new main sources of company's success that is its intellectual capital.