Returns to effort in rent-seeking games

Giuseppe Dari-Mattiacci and Francesco Parisi

Public Choice, 2014, vol. 159, issue 1, 99-104

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. Copyright Springer Science+Business Media New York 2014

Keywords: Rent-seeking games; Returns to effort; Normalization of values; D72 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (8)

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DOI: 10.1007/s11127-012-0020-3

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