Risk Aversion in Rent‐Seeking and Rent‐Augmenting Games

13 Pages Posted: 28 Jan 2012

See all articles by Kai A. Konrad

Kai A. Konrad

Max Planck Institute for Tax Law and Public Finance; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute for Economic Research); IZA Institute of Labor Economics

Harris Schlesinger

University of Alabama; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: November 1997

Abstract

The effects of risk aversion are examined for two types of expenditures in rent‐seeking contests: (a) Rent‐Seeking Expenditures, which improve the probability that the rent is obtained; and (b)) Rent‐Augmenting Expenditures, which increase the size of the rent to be awarded. Risk aversion is shown to reduce expenditures of type (b) unambiguously, while having an indeterminate effect on those of type (a). These two contrasting results are shown to derive from the very different effects rent‐seeking and rent‐augmenting expenditures have on the riskiness of a player's position.

Suggested Citation

Konrad, Kai A. and Schlesinger, Harris, Risk Aversion in Rent‐Seeking and Rent‐Augmenting Games (November 1997). The Economic Journal, Vol. 107, Issue 445, pp. 1671-1683, 1997, Available at SSRN: https://ssrn.com/abstract=1994222 or http://dx.doi.org/10.1111/j.1468-0297.1997.tb00074.x

Kai A. Konrad (Contact Author)

Max Planck Institute for Tax Law and Public Finance ( email )

Marstallplatz 1
Munich, 80539
Germany

HOME PAGE: http://www.tax.mpg.de/en/pub/home.cfm

Centre for Economic Policy Research (CEPR)

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United Kingdom

CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Poschinger Str. 5
Munich, 81679
Germany

IZA Institute of Labor Economics

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Bonn, 53072
Germany

Harris Schlesinger

University of Alabama ( email )

P.O. Box 870244
200 Alston Hall, Box 870224
Tuscaloosa, AL 35487
United States
205-348-7858 (Phone)
205-348-0590 (Fax)

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

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