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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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  16. Garfinkel, Michelle R. & Skaperdas, Stergios, 2007. "Economics of Conflict: An Overview," Handbook of Defense Economics, Elsevier.
  17. Milgrom, Paul & Roberts, John, 1994. "Comparing Equilibria," American Economic Review, American Economic Association, vol. 84(3), pages 441-59, June.
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