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Risk-Aversion and Prudence in Rent-Seeking Games

  • Treich, Nicolas

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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Paper provided by Toulouse School of Economics (TSE) in its series TSE Working Papers with number 09-013.

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Date of creation: 17 Feb 2009
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Handle: RePEc:tse:wpaper:22139
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