Economic papers

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. JEL Classification: C73, D72, D82