Conjectural variations and the nature of equilibrium in rent-seeking models

Abstract

In a symmetric two-person rent-seeking game, it is shown that nonzero conjectural variations can be incorporated to yield a larger class of solutions than has been hitherto analyzed. The author shows that the fraction of rents dissipated as expenditures by seekers depends on the conjectural variation which is assumed, and that Posner's assertion of full dissipation in his model only holds under a Bertrand conjecture. All admissible constant conjectural variations which are held by both players yield conjecturally consistent equilibria, but the result no longer holds if the game has a systematic bias toward one player.