Karl Wärneryd: Department of Economics, Postal: Stockholm School of Economics, Box 6501, 113 83 Stockholm, Sweden.
Abstract: We study the long-run behavior 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. In contrast with standard evolutionary game theory, we distinguish between utility and material payoffs, and allow the population distribution of preferences to evolve 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 rent seeking, and the available rents are perfectly dissipated.
27 pages, October 1995
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