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Rent, risk, and replication: preference adaptation in winner-take-all markets
[Rente, Risiko und Replikation – Präferenz- Anpassung in „Der-Sieger-bekommt-alles“ Märkten]

  • Wärneryd, Karl

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.

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Paper provided by Social Science Research Center Berlin (WZB) in its series Discussion Papers, Research Unit: Market Processes and Governance with number FS IV 01-10.

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Date of creation: 2001
Date of revision:
Handle: RePEc:zbw:wzbmpg:fsiv0110
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  1. Oechssler, Joerg & Frank Riedel, 1999. "Evolutionary Dynamics on Infinite Strategy Spaces," Discussion Paper Serie A 606, University of Bonn, Germany.
  2. W. Güth & S. Nitzan, 1997. "The Evolutionary Stability of Moral Objections to Free Riding," Economics and Politics, Wiley Blackwell, vol. 9(2), pages 133-149, 07.
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  7. Paul R. Milgrom., 1987. "Employment Contracts, Influence Activities and Efficient Organization Design," Economics Working Papers 8741, University of California at Berkeley.
  8. Bester, Helmut & Guth, Werner, 1998. "Is altruism evolutionarily stable?," Journal of Economic Behavior & Organization, Elsevier, vol. 34(2), pages 193-209, February.
  9. Rogers, Alan R, 1994. "Evolution of Time Preference by Natural Selection," American Economic Review, American Economic Association, vol. 84(3), pages 460-81, June.
  10. George J. Mailath, 1998. "Do People Play Nash Equilibrium? Lessons from Evolutionary Game Theory," Journal of Economic Literature, American Economic Association, vol. 36(3), pages 1347-1374, September.
  11. Boylan, Richard T., 1990. "Laws of Large Numbers for Dynamical Systems with Randomly Matched Individuals," Working Papers 748, California Institute of Technology, Division of the Humanities and Social Sciences.
  12. Robson, Arthur J., 1996. "The Evolution of Attitudes to Risk: Lottery Tickets and Relative Wealth," Games and Economic Behavior, Elsevier, vol. 14(2), pages 190-207, June.
  13. Waldman, Michael, 1994. "Systematic Errors and the Theory of Natural Selection," American Economic Review, American Economic Association, vol. 84(3), pages 482-97, June.
  14. Ted To, 1995. "Risk and Evolution," Microeconomics 9511003, EconWPA.
  15. Robson, Arthur J., 1996. "A Biological Basis for Expected and Non-expected Utility," Journal of Economic Theory, Elsevier, vol. 68(2), pages 397-424, February.
  16. George J. Mailath, 1998. "Corrigenda [Do People Play Nash Equilibrium? Lessons from Evolutionary Game Theory]," Journal of Economic Literature, American Economic Association, vol. 36(4), pages 1941-1941, December.
  17. Judd, Kenneth L., 1985. "The law of large numbers with a continuum of IID random variables," Journal of Economic Theory, Elsevier, vol. 35(1), pages 19-25, February.
  18. Karni, Edi & Schmeidler, David, 1986. "Self-preservation as a foundation of rational behavior under risk," Journal of Economic Behavior & Organization, Elsevier, vol. 7(1), pages 71-81, March.
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