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Title: |
Policies to Reduce Rent Seeking in Controlled Markets |
| Author: |
Kim Sunwoong; Hoo, Yoon-Ha |
| Author
Affiliation: |
University of Wisconsin–Milwaukee, WI, USA; KDI School of Public Policy and Management, Seoul, Korea |
| Source: |
International Economic Journal, March 2007, v. 21, no. 2, pp. 27-48 |
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Publication Date: |
March 2007 |
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Abstract: |
We analyze various policies to reduce rent seeking in the controlled market in which buyers have heterogeneous valuation regarding the coveted good. The good is allocated according to the buyer-specific signal ("test score"), which is determined by the level of wasteful "rent seeking". We examine the effects of various policies to reduce rent seeking, under three common forms of control: minimum cut-off score, quota, and price ceiling. Although the applicants with higher valuations are more likely to receive the good in equilibrium, they exert more rent seeking efforts. Typically, the effectiveness of policy measures depends on the current degree of competitiveness in the market.
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