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Rent, risk, and replication: Preference adaptation in winner-take-all markets

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  • Warneryd, Karl

Abstract

We study the evolution of an economy where agents who are heterogeneous with respect to risk attitudes can either earn a certain income or enter a risky rent-seeking contest. We assume that agents behave rationally given their preferences, but that the population distribution of preferences evolves over time in response to material payoffs. We show that, in particular, initial distributions with full support converge to stationary states where all types may still be present, risk lovers specialize in rentseeking, and the available rents are perfectly dissipated. -- Der Autor untersucht die Entwicklung einer Volkswirtschaft, in der sich die Akteure in ihrer Einstellung zu Risiken unterscheiden. Sie können entweder ein bestimmtes Einkommen erlangen oder sich in einen riskanten Rent-Seeking-Wettbewerb (Wettbewerb zum Erlangen einer Rente) begeben. Angenommen wird rationales Verhalten der Akteure bei gegebenen Präferenzen an, wobei sich die Verteilung der Präferenzen innerhalb der Bevölkerung als Antwort auf die materiellen Ergebnisse des Wettbewerbs entwickelt. Es wird gezeigt, daß im einzelnen, die ursprünglichen Verteilungen mit ganzer Unterstützung gegen stationäre Zustände konvergieren, in welchen noch immer alle Typen präsent sein können. Dabei spezialisieren sich risikofreudige Individuen auf Rent-seeking und die erzielbaren Renten sind perfekt gestreut.

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Article provided by Elsevier in its journal Games and Economic Behavior.

Volume (Year): 41 (2002)
Issue (Month): 2 (November)
Pages: 344-364

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Handle: RePEc:eee:gamebe:v:41:y:2002:i:2:p:344-364

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Web page: http://www.elsevier.com/locate/inca/622836

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Cited by:
  1. Erik Mohlin, 2010. "Internalized social norms in conflicts: an evolutionary approach," Economics of Governance, Springer, vol. 11(2), pages 169-181, April.
  2. De Fraja, Gianni, 2009. "The origin of utility: Sexual selection and conspicuous consumption," Journal of Economic Behavior & Organization, Elsevier, vol. 72(1), pages 51-69, October.
  3. Boudreau, James W. & Shunda, Nicholas, 2012. "On the evolution of prize perceptions in contests," Economics Letters, Elsevier, vol. 116(3), pages 498-501.
  4. Charness, Gary & Rustichini, Aldo, 2011. "Gender differences in cooperation with group membership," Games and Economic Behavior, Elsevier, vol. 72(1), pages 77-85, May.
  5. Wärneryd, Karl, 2013. "Common-value contests with asymmetric information," Economics Letters, Elsevier, vol. 120(3), pages 525-527.
  6. Hvide, H.K. & Kristiansen, E.G., 1999. "Risk Taking in Selection Contests," Papers 5-99, Tel Aviv.
  7. Schipper, Burkhard C., 2005. "The Evolutionary Stability of Optimism, Pessimism and Complete Ignorance," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 68, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  8. De Fraja, Gianni, 2006. "The Origin of Utility," CEPR Discussion Papers 5859, C.E.P.R. Discussion Papers.
  9. Wärneryd, Karl, 2012. "The evolution of preferences for conflict," Economics Letters, Elsevier, vol. 116(1), pages 102-104.

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