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Bonn Econ Discussion Papers, Bonn Graduate School of Economics (BGSE), Universität Bonn >
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http://hdl.handle.net/10419/27168
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| Title: | | Risk taking in winner-take-all competition  |
| Authors: | | Kräkel, Matthias Nieken, Petra Przemeck, Judith |
| Issue Date: | | 2008 |
| Series/Report no.: | | Bonn econ discussion papers 2008,7 |
| Abstract: | | We analyze a two-stage game between two heterogeneous players. At stage one, risk is chosen by one of the players. At stage two, both players observe the given level of risk and simultaneously invest in a winner-take-all competition. The game is solved theoretically and then tested by using laboratory experiments. We find three effects that determine risk taking at stage one - a discouragement effect, a cost effect and a likelihood effect. For the likelihood effect, risk taking and investmentsare clearly in line with theory. Pairwise comparison shows that the cost effect seems to be more relevant than the discouragement effect when taking risk. |
| Subjects: | | Tournaments Competition Risk-Taking |
| JEL: | | M51 C91 D23 |
| Document Type: | | Working Paper |
| Appears in Collections: | | Bonn Econ Discussion Papers, Bonn Graduate School of Economics (BGSE), Universität Bonn
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