Loss Aversion and the Tullock Paradox
Richard C. Cornes
Australian National University (ANU) - Faculty of Economics & Commerce; CESifo (Center for Economic Studies and Ifo Institute)
University of Nottingham Economics Discussion Paper No. 03/17
We show that the presence of loss aversion on the part of participants in a Tullock imperfectly discriminating contest will significantly reduce the proportion of the rent dissipated in the form of resources used up in the competition for that rent. We also suggest a simple experiment that can reveal whether contestants are, indeed, loss averse.
JEL Classification: C72, D72, D80
Date posted: June 30, 2004
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