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Rent, risk, and replication: Preference adaptation in winner-take-all markets

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  • Warneryd, Karl

Abstract

We study the evolution of an economy where agents who are heterogeneous with respect to risk attitudes can either earn a certain income or enter a risky rent-seeking contest. We assume that agents behave rationally given their preferences, but that the population distribution of preferences evolves over time in response to material payoffs. We show that, in particular, initial distributions with full support converge to stationary states where all types may still be present, risk lovers specialize in rentseeking, and the available rents are perfectly dissipated.
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  • Warneryd, Karl, 2002. "Rent, risk, and replication: Preference adaptation in winner-take-all markets," Games and Economic Behavior, Elsevier, vol. 41(2), pages 344-364, November.
    • Handle: RePEc:eee:gamebe:v:41:y:2002:i:2:p:344-364
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    3. Wärneryd, Karl, 2013. "Common-value contests with asymmetric information," Economics Letters, Elsevier, vol. 120(3), pages 525-527.
    4. Burkhard C. Schipper, 2021. "The evolutionary stability of optimism, pessimism, and complete ignorance," Theory and Decision, Springer, vol. 90(3), pages 417-454, May.
    5. Kai A. Konrad & Dan Kovenock, 2010. "Contests With Stochastic Abilities," Economic Inquiry, Western Economic Association International, vol. 48(1), pages 89-103, January.
    6. Erik Mohlin, 2010. "Internalized social norms in conflicts: an evolutionary approach," Economics of Governance, Springer, vol. 11(2), pages 169-181, April.
    7. Hvide, Hans K. & Kristiansen, Eirik G., 2003. "Risk taking in selection contests," Games and Economic Behavior, Elsevier, vol. 42(1), pages 172-179, January.
    8. De Fraja, Gianni, 2006. "The Origin of Utility," CEPR Discussion Papers 5859, C.E.P.R. Discussion Papers.
    9. Charness, Gary & Rustichini, Aldo, 2011. "Gender differences in cooperation with group membership," Games and Economic Behavior, Elsevier, vol. 72(1), pages 77-85, May.
    10. Wärneryd, Karl, 2012. "The evolution of preferences for conflict," Economics Letters, Elsevier, vol. 116(1), pages 102-104.

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    More about this item

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General

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