Glazer, Amihai; Konrad, Kai A.
Taxation of Rent-Seeking Activities.
Papers / University of California, School of Social Sciences, 97-98-04
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We consider taxes on firms which engage in rent-seeking contests. The taxes can be on realized profits or on rent-seeking expenditures, and the firms can engage in a context where either the hoghest bidder wins the prize, or else a firm's probability of winning equals the ratio of its expenditures to expenditures by all firms. We find the deadweight loss, and cause no reduction in the profits of firms.