RISK-AVERSION IN RENT-SEEKING AND RENT-AUGMENTING GAMES

The effects of risk aversion are examined for two types of expenditure s in rent-seeking contests: (a) Rent-Seeking Expenditures, which impro ve the probability that the rent is obtained;and (b) Rent-Augmenting E xpenditures, which increase the size of the rent to be awarded. Risk a version is shown to reduce expenditures of type (b) unambiguously, whi le having an indeterminate effect on those of type (a). These two cont rasting results are shown to derive from the very different effects re nt-seeking and rent-augmenting expenditures have on the riskiness of a player's position.