- Returns to effort in rent-seeking games
- Public Choice
- Volume | Issue number
- 159 | 1-2
- Pages (from-to)
- Document type
- Interfacultary Research Institutes
Faculty of Economics and Business (FEB)
Faculty of Law (FdR)
- Amsterdam Center for Law & Economics (ACLE)
Amsterdam Business School Research Institute (ABS-RI)
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.
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