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Risk-aversion and Prudence in Rent-seeking Games

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  • TREICH Nicolas

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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File URL: http://www2.toulouse.inra.fr/lerna/travaux/cahiers2009/09.05.281.pdf
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Bibliographic Info

Paper provided by LERNA, University of Toulouse in its series LERNA Working Papers with number 09.05.281.

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Date of creation: Feb 2009
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Handle: RePEc:ler:wpaper:09.05.281

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Citations

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Cited by:
  1. Richard Cornes & Roger Hartley, 2012. "Risk aversion in symmetric and asymmetric contests," Economic Theory, Springer, vol. 51(2), pages 247-275, October.
  2. Mago, Shakun D. & Sheremeta, Roman M. & Yates, Andrew, 2013. "Best-of-three contest experiments: Strategic versus psychological momentum," International Journal of Industrial Organization, Elsevier, vol. 31(3), pages 287-296.
  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. 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.
  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. 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.
  7. 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.
  8. 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.
  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.

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