Risk Taking in Winner-Take-All Competition

Matthias Kräkel, Petra Nieken and Judith Przemeck

No 7/2008, Bonn Econ Discussion Papers from University of Bonn, Bonn Graduate School of Economics (BGSE)

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 takin risk.

Keywords: Tournaments; Competition; Risk-Taking (search for similar items in EconPapers)
JEL-codes: C91 D23 M51 (search for similar items in EconPapers)
Date: 2008
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/27168/1/587681020.PDF (application/pdf)

Related works:
Journal Article: Risk taking and investing in electoral competition (2014)
Working Paper: Risk Taking in Winner-Take-All Competition (2008)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:bonedp:72008

Access Statistics for this paper

More papers in Bonn Econ Discussion Papers from University of Bonn, Bonn Graduate School of Economics (BGSE) Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics (econstor@zbw-workspace.eu).