There are numerous economic environments where agents use some of their resources for directly unproductive purposes. Rent- seeking, influence activities in organizations as well as expenditures on armaments are some activities which can be classified in this category. Although undertaking such activities is an individually rational enterprise, the social outcome is typically inefficient. The purpose of this research is to analyze a series of topics using models where agents allocate their resource endowments between productive inputs and directly unproductive activities. Total output depends on the productive inputs and it is distributed among the agents according to their relative contributions in the directly unproductive activity. This distribution mechanism sharply contrasts with the competitive mechanism in at least one respect: Agent-specific productivity improvements are disadvantageous to the agent who undertakes them. Related topics examined in this setting include the determinants of the individual welfare of agents; the primary reasons for inefficiency and incentives for the adoption of alternative allocation mechanisms; individual behavior within groups; and dynamic efficiency and distributional effects. The research is of descriptive as well as of normative significance for variety of institutional environments where the primary means of distribution are directly unproductive activities.
