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Returns to Effort in Rent-Seeking Games

Posted: 29 Aug 2012 Last revised: 2 Oct 2017

Giuseppe Dari‐Mattiacci

Amsterdam Law School; Amsterdam Business School; Tinbergen Institute

Francesco Parisi

University of Minnesota - Law School; University of Bologna

Date Written: July 19, 2012

Abstract

In the traditional formulation of rent-seeking games, increasing returns to effort are characterized by an exponent r > 1. However,when the value of rent is normalized to 1, the players’ effort levels A and B will typically be less than 1. Thus, when A < 1 and r > 1, the value of Ar decreases as r increases, contradicting the interpretation of r > 1 as representing increasing returns to effort. This apparent defect in the mathematization of the problem seems to suggest that a different interpretation of r is required where A < 1, upsetting the uniformity and elegance of the model. In this short note, we demonstrate that the perceived problem is illusory, and that the usual interpretation of r is satisfactory for all values of A.

Keywords: rent-seeking games, returns to effort, normalization of values

JEL Classification: D72

Suggested Citation

Dari‐Mattiacci, Giuseppe and Parisi, Francesco, Returns to Effort in Rent-Seeking Games (July 19, 2012). Minnesota Legal Studies Research Paper No. 12-37; Public Choice 2014; Minnesota Legal Studies Research Paper No. 12-37; Amsterdam Law School Research Paper No. 2012-83; Amsterdam Center for Law & Economics Working Paper No. 2012-06. Available at SSRN: https://ssrn.com/abstract=2138351 or http://dx.doi.org/10.2139/ssrn.2138351

Giuseppe Dari-Mattiacci

Amsterdam Law School ( email )

Nieuwe Achtergract 166
Amsterdam, 1018 WV
Netherlands

HOME PAGE: http://uva.nl/profile/g.darimattiacci

Amsterdam Business School ( email )

Plantage Muidergracht 12
Amsterdam, 1018TV
Netherlands

HOME PAGE: http://uva.nl/profile/g.darimattiacci

Tinbergen Institute ( email )

Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands

HOME PAGE: http://uva.nl/profile/g.darimattiacci

Francesco Parisi (Contact Author)

University of Minnesota - Law School ( email )

229 19th Avenue South
Minneapolis, MN 55455
United States

University of Bologna ( email )

Piazza Scaravilli 1
40126 Bologna, fc 47100
Italy

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