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Title:Risk taking in winner-take-all competition PDF Logo
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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