Returns to effort in rent-seeking games

Giuseppe Dari-Mattiacci, Francesco Parisi

Research output: Contribution to journalArticlepeer-review

9 Scopus citations

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 the 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 A r 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 whenever 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.

Original languageEnglish (US)
Pages (from-to)99-104
Number of pages6
JournalPublic Choice
Volume159
Issue number1-2
DOIs
StatePublished - Apr 2014

Keywords

  • Normalization of values
  • Rent-seeking games
  • Returns to effort

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