Risk Taking in Winner-Take-All Competition

Matthias Kräkel (), Petra Nieken and Judith Przemeck ()

Bonn Econ Discussion Papers from University of Bonn, Germany

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; Experiment (search for similar items in EconPapers)
JEL-codes: M51 C91 D23 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cbe, nep-com, nep-exp and nep-upt
Date: 2008-04-03
View list of references

Downloads: (external link)
ftp://web.bgse.uni-bonn.de/pub/RePEc/bon/bonedp/bgse7_2008.pdf (application/pdf)

Related works:
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: http://EconPapers.repec.org/RePEc:bon:bonedp:bgse7_2008

Access Statistics for this paper

More papers in Bonn Econ Discussion Papers from University of Bonn, Germany
Address: Bonn Graduate School of Economics, University of Bonn, Adenauerallee 24 - 26, 53113 Bonn, Germany
Series data maintained by Daniel Park ().