Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/94021 
Year of Publication: 
2008
Series/Report no.: 
SFB/TR 15 Discussion Paper No. 233
Publisher: 
Sonderforschungsbereich/Transregio 15 - Governance and the Efficiency of Economic Systems (GESY), München
Abstract: 
We analyze a two-stage game between two heterogeneous players. At stage one, common 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 - an effort effect, a likelihood effect and a reversed likelihood effect. For the likelihood effect, risk taking and investments are clearly in line with theory. Pairwise comparison shows that the effort effect seems to be more relevant than the reversed likelihood effect when taking risk.
Subjects: 
Tournaments
Competition
Risk-Taking
Experiment
JEL: 
M51
C91
D23
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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