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Risk aversion and prudence in contests

Marco Sahm ()
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Marco Sahm: University of Bamberg

Economics Bulletin, 2017, vol. 37, issue 2, 1122-1132

Abstract: I examine the impact of risk preferences on efforts and winning probabilities in generalized Tullock contests between two players. The theoretical analysis yields two main results. First, in symmetric contests, a higher common level of the agents´ risk aversion will lead to lower aggregate effort if it comes along with an increase in downside risk aversion. Second, in many asymmetric contests, higher risk-aversion will be a disadvantage if the agent is also more downside risk-averse.

Keywords: Tullock contest; risk aversion; prudence; downside risk aversion (search for similar items in EconPapers)
JEL-codes: D7 C7 (search for similar items in EconPapers)
Date: 2017-05-25
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