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Risk-aversion and prudence in rent-seeking games

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  • Nicolas Treich

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Abstract

This paper considers a common n-agent symmetric rent-seeking game. It derives conditions so that risk-aversion and risk always decrease rent-seeking efforts. These conditions hold for any regular contest success function when risk-averse rent-seekers are also prudent. Under n = 2, prudence is a necessary and sufficient condition for risk-aversion to decrease rent-seeking efforts compared to risk-neutrality. An intuition for this result is given based on a self-protection model.

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Bibliographic Info

Article provided by Springer in its journal Public Choice.

Volume (Year): 145 (2010)
Issue (Month): 3 (December)
Pages: 339-349

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Handle: RePEc:kap:pubcho:v:145:y:2010:i:3:p:339-349

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Web page: http://www.springerlink.com/link.asp?id=100332

Related research

Keywords: Risk-aversion; Rent-seeking; Lobbying; Uncertainty; Prudence; Self-protection; C72; D72; D81;

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Citations

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Cited by:
  1. Shakun D. Mago & Roman M. Sheremeta & Andrew Yates, 2012. "Best-of-Three Contest Experiments: Strategic versus Psychological Momentum," Working Papers 12-30, Chapman University, Economic Science Institute.
  2. Charles N. Noussair & Stefan T. Trautmann & Gijs van de Kuilen, 2014. "Higher Order Risk Attitudes, Demographics, and Financial Decisions," Review of Economic Studies, Oxford University Press, vol. 81(1), pages 325-355.
  3. Jean-Daniel Guigou & Bruno Lovat & Marc Boissaux, 2013. "Asymmetric contests with risky rents," LSF Research Working Paper Series 13-9, Luxembourg School of Finance, University of Luxembourg.
  4. Kocher, Martin & Pahlke, Julius & Trautmann, Stefan, 2013. "An Experimental Study of Precautionary Bidding," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79690, Verein für Socialpolitik / German Economic Association.
  5. Gollier, Christian & Hammitt, James & Treich, Nicolas, 2013. "Risk and Choice: A Research Saga," IDEI Working Papers 804, Institut d'Économie Industrielle (IDEI), Toulouse.
  6. Van Long, Ngo, 2013. "The theory of contests: A unified model and review of the literature," European Journal of Political Economy, Elsevier, vol. 32(C), pages 161-181.
  7. Kahana, Nava & Klunover, Doron, 2014. "Rent Seeking and the Excess Burden of Taxation," IZA Discussion Papers 8160, Institute for the Study of Labor (IZA).
  8. Jean-Daniel Guigou & Bruno Lovat & Marc Boissaux, 2013. "Asymmetric contests with risky rents," CREA Discussion Paper Series 13-9, Center for Research in Economic Analysis, University of Luxembourg.
  9. Murray, Cameron K., 2012. "Markets in political influence: rent-seeking, networks and groups," MPRA Paper 42070, University Library of Munich, Germany.
  10. Schroyen, Fred & Treich, Nicolas, 2013. "The Power of Money: Wealth Effects in Contests," Discussion Paper Series in Economics 13/2013, Department of Economics, Norwegian School of Economics.
  11. Christian Ewerhart, 2014. "Elastic contests and the robustness of the all-pay auctions," ECON - Working Papers 155, Department of Economics - University of Zurich.

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