Is it really overdissipation? A reassessment of evolutionarily stable behavior in contests

Wolfgang Leininger

No 809, Ruhr Economic Papers from RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen

Abstract: The term "rent-dissipation" is prominently used in the theory of rent-seeking and its (game) theoretical vehicle contest theory. While in a pure strategy Nash equilibrium of a contest with finitely many players full rent-dissipation cannot occur, this is not the case if the same contests are analyzed with the solution concept of an evolutionarily stable strategy (ESS). Notably, even over-dissipation of a rent in pure strategy ESS is feasible! The paper explains these differences from a principle point of view by linking the ESS-solution theory in contests to the Nash equilibrium solution theory of transfer contests. This insight then not only makes the computation of the ESS-solution of a contest from the Nash solution of a transfer contest an easy exercise, but-more importantly - also leads to a reassessment of the ESS-"over-dissipation" results in the earlier literature: if one replaces the value of the rent with its transfer value, over-dissipation becomes incompatible with ESS, too.

Keywords: contests; evolutionarily stable strategy; finite population; overdissipation (search for similar items in EconPapers)
JEL-codes: C73 D72 D82 (search for similar items in EconPapers)
Date: 2019
New Economics Papers: this item is included in nep-gth
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:rwirep:809

DOI: 10.4419/86788938

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