The power of money: Wealth effects in contests

Fred Schroyen and Nicolas Treich

Games and Economic Behavior, 2016, vol. 100, issue C, 46-68

Abstract: The relationship between wealth and power has long been debated. Nevertheless, this relationship has been rarely studied in a strategic game. In this paper, we study wealth effects in a strategic contest game. Two opposing effects arise: wealth reduces the marginal cost of effort but it also reduces the marginal benefit of winning the contest. We consider three types of contests which vary depending on whether rents and efforts are commensurable with wealth. Our theoretical analysis shows that the effects of wealth are strongly “contest-dependent”. It thus does not support general claims that the rich lobby more or that low economic growth and wealth inequality spur conflicts.

Keywords: Conflict; Contest; Rent-seeking; Wealth; Risk aversion; Lobbying; Power; Redistribution (search for similar items in EconPapers)
JEL-codes: C72 D72 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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Related works:
Working Paper: The Power of Money: Wealth Effects in Contests (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:gamebe:v:100:y:2016:i:c:p:46-68

DOI: 10.1016/j.geb.2016.09.005

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