Savings and Predation

We contrast the relationship between predation and the savings of its potential victim in two different simple models. In the first model, predation is an exogenous event in which savings are expropriated with some fixed probability. In such a setting, the higher the probability of expropriation the lower are savings. In the second model, we endow the predatory agent with a decision whether to expropriate or to devote his efforts to some productive endeavor. In this second model, the (endogenous) probability of expropriation can easily be positively correlated with savings. In addition, we show that predation is more damaging to the savings and utility of the victim in the second model. (JEL: D91, D74) (c) 2010 by the European Economic Association.