Prof. Dr. Wolfgang Leininger

• Mitglied des  Editorial Board des Journal of Evolutionary Economics
• Co-Editor der Ruhr Economic Papers
• Mitglied des Scientific Advisory Board des Hausdorff Center of Mathematics, Bonn
• Mitglied im Senatsausschuss Strategische Vorhaben der Leibniz-Gemeinschaft (WGL)
• Mitglied im Theoretischen Ausschuss des Vereins für Socialpolitik, Berlin

Overdissipation: A Reassessment of Evolutionarily Stable Behavior in Contests,  July 2020

Abstract:  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 evolutionarilystable strategy (ESS). Notably, even overdissipation of a rent in purestrategy ESS is feasible!

The paper explains these differences from a principle point of viewby 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 theNash solution of a transfer contest an easy exercise, but - more importantly - also leads to a reassessment of the ESS-”overdissipation” results in the earlierliterature: correct ”rationalization” of ESS behavior in a contest for a rent as Nash behavior of absolute payoff maximizers must consider the transfer value instead of the value. As a consequence overdissipation cannot occur in any ESS either.