Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/128618
Authors: 
Bergerhoff, Jan
Vosen, Agnes
Year of Publication: 
2015
Series/Report no.: 
Bonn Econ Discussion Papers 03/2015
Abstract: 
Everyone remembers a plot where a disadvantaged individual facing the prospect of failure, spends more effort, turns around the game and wins unexpectedly. Most tournament theories, however, predict the opposite pattern and see the disadvantaged agent investing less effort. We show that 'turn arounds', i.e. situations where the trailing player spends more effort and becomes the likely winner of the tournament, can be the outcome of a Nash equilibrium when the initial unevenness is known an d players have reference-dependent preferences. Under certain conditions, they are the only pure strategy equilibrium. If the initial unevenness is large enough the advant aged player will always invest the most effort. We also show that equilibria in which the player behind catches up without becoming the likely winner do not exist.
Subjects: 
loss aversion
gain-loss utility
normal distribution
competition
JEL: 
C72
D63
D44
Document Type: 
Working Paper

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