Economic Theory Bulletin

, Volume 5, Issue 2, pp 151–164 | Cite as

Risky rents

  • Jean-Daniel Guigou
  • Bruno LovatEmail author
  • Nicolas Treich
Research Article


We consider a strategic contest game in which risk-averse agents exert efforts to increase their share of a risky rent. We show that a unique symmetric equilibrium always exists under constant or decreasing absolute risk aversion. We also show that agents exert in general less efforts when they are more risk averse or when the rent is more risky.


Contest Rent seeking Risk Risk aversion Shared rents 

JEL Classification

C72 D72 D81 


  1. Congleton, R., Hillman, A.: Companion to the political economy of rent seeking. Edward Elgar Publishing (2015)Google Scholar
  2. Corchón, L.: The theory of contests: a survey. Rev. Econ. Des. 11, 69–100 (2007)Google Scholar
  3. Cornes, R., Hartley, R.: Risk aversion, heterogeneity and contests. Publ. Choice 117, 1–25 (2003)CrossRefGoogle Scholar
  4. Cornes, R., Hartley, R.: Risk aversion in symmetric and asymmetric contests. Econ. Theory 51, 247–275 (2012)CrossRefGoogle Scholar
  5. Dechenaux, E., Kovenock, D., Sheremeta, R.: A survey of experimental research on contests, all-pay auctions and tournaments. Exp. Econ. 18, 609–669 (2015)CrossRefGoogle Scholar
  6. Hadar, J., Seo, T.K.: The effects of shifts in a return distribution on optimal portfolios. Int. Econ. Rev. 31, 721–736 (1990)CrossRefGoogle Scholar
  7. Hanley, N., MacKenzie, I.A.: The effects of rent seeking over tradable pollution permits. B.E. J. Econ. Anal. Policy 10, 56 (2010)Google Scholar
  8. Hillman, A., Katz, E.: Risk-averse rent seekers and the social cost of monopoly power. Econ. J. 94, 104–110 (1984)CrossRefGoogle Scholar
  9. Harstad, R.: Privately informed seekers of an uncertain rent. Public Choice 83, 81–93 (1995)CrossRefGoogle Scholar
  10. Kimball, M.: Precautionary savings in the small and in the large. Econometrica 58, 53–73 (1990)CrossRefGoogle Scholar
  11. Konrad, K.: Strategy and dynamics in contests. Oxford University Press, Oxford (2009)Google Scholar
  12. Konrad, K., Schlesinger, H.: Risk aversion in rent-seeking and rent-augmenting games. Econ. J. 107, 1671–1683 (1997)CrossRefGoogle Scholar
  13. Krueger, A.: The political economy of the rent-seeking society. Am. Econ. Rev. 64, 291–303 (1974)Google Scholar
  14. Leland, H.E.: Theory of the firm facing uncertain demand. Am. Econ. Rev. 3, 278–291 (1972)Google Scholar
  15. Long, N.V.: The theory of contests: a unified model and review of the literature. Eur. J. Political Econ. 32, 161–181 (2013)CrossRefGoogle Scholar
  16. Long, N.V., Vousden, N.: Risk-averse rent seeking with shared rents. Econ. J. 97, 971–985 (1987)CrossRefGoogle Scholar
  17. Menezes, C., Geiss, C., Tressler, J.: Increasing downside risk. Am. Econ. Rev. 70, 921–932 (1980)Google Scholar
  18. Menezes, F.M., Quiggin, J.: Markets for influence. Int. J. Ind. Organ. 28, 307–310 (2010)CrossRefGoogle Scholar
  19. Öncüler, A., Croson, R.: Rent-seeking for a risky rent: A model and experimental investigation. J. Theor. Politics 17, 403–429 (2005)CrossRefGoogle Scholar
  20. Pratt, J.: Risk aversion in the small and in the large. Econometrica 32, 122–136 (1964)CrossRefGoogle Scholar
  21. Rode, A.: Rent-seeking over tradable emission permits: Theory and evidence. Mimeo (2014)Google Scholar
  22. Rothschild, M., Stiglitz, J.: Increasing risk: I. A definition. J. Econ. Theory 2, 225–243 (1970)CrossRefGoogle Scholar
  23. Rothschild, M., Stiglitz, J.: Increasing risk: II. Its economic consequences. J. Econ. Theory 3, 66–84 (1971)CrossRefGoogle Scholar
  24. Sahm, M.: The contest winner: gifted or venturesome. Mimeo (2015)Google Scholar
  25. Schindler, D., Stracke R.: The incentives effects of uncertainty in tournaments. Mimeo (2016)Google Scholar
  26. Schroyen, F., Treich, N.: The power of money: Wealth effects in contests. Games and Economic Behavior, forthcoming (2016)Google Scholar
  27. Skaperdas, S., Gan, L.: Risk aversion in contests. Econ. J. 105, 951–962 (1995)CrossRefGoogle Scholar
  28. Treich, N.: Risk aversion and prudence in rent seeking games. Publ. Choice 145, 339–349 (2010)CrossRefGoogle Scholar
  29. Tullock, G.: Efficient rent seeking. In Buchanan, J., Tollison, R., Tullock, G. (eds.), Toward a Theory of the Rent-Seeking Society, 97–112 (1980)Google Scholar
  30. Tullock, G.: The welfare costs of tariffs, monopolies, and theft. West. Econ. J. 5, 224–232 (1967)Google Scholar
  31. Wärneryd, K.: Information in conflicts. J. Econ. Theory 110, 121–136 (2003)CrossRefGoogle Scholar

Copyright information

© Society for the Advancement of Economic Theory 2016

Authors and Affiliations

  • Jean-Daniel Guigou
    • 1
  • Bruno Lovat
    • 2
    Email author
  • Nicolas Treich
    • 3
  1. 1.University of Luxembourg (LSF)Luxembourg CityLuxembourg
  2. 2.Université de Lorraine (BETA-CNRS)NancyFrance
  3. 3.Toulouse School of Economics, INRAUniversity Toulouse CapitoleToulouseFrance

Personalised recommendations