Risk lovers and the rent over-investment puzzle

Paan Jindapon and Christopher Whaley ()

Public Choice, 2015, vol. 164, issue 1, 87-101

Abstract: In this paper, we prove existence and uniqueness of equilibrium in a rent-seeking contest given a class of heterogeneous risk-loving players. We explore the role third-order risk attitude plays in equilibrium and find that imprudence is sufficient for risk lovers to increase rent-seeking investment above the risk-neutral outcome. Moreover, we show that rent can be fully dissipated in a standard Tullock contest played by a large number of risk-lovers. Copyright Springer Science+Business Media New York 2015

Keywords: Prudence; Risk lovers; Rent seeking; Contest; C72; D81; D72 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (19)

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Persistent link: https://EconPapers.repec.org/RePEc:kap:pubcho:v:164:y:2015:i:1:p:87-101

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DOI: 10.1007/s11127-015-0270-y

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