TY - JOUR
T1 - Returns to effort in rent-seeking games
AU - Dari-Mattiacci, Giuseppe
AU - Parisi, Francesco
PY - 2014/4
Y1 - 2014/4
N2 - 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.
AB - 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.
KW - Normalization of values
KW - Rent-seeking games
KW - Returns to effort
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U2 - 10.1007/s11127-012-0020-3
DO - 10.1007/s11127-012-0020-3
M3 - Article
AN - SCOPUS:84897030473
SN - 0048-5829
VL - 159
SP - 99
EP - 104
JO - Public Choice
JF - Public Choice
IS - 1-2
ER -