Multi-prize contests with expectation-based loss-averse players

Qiang Fu, Xiruo Wang and Yuxuan Zhu

Economics Letters, 2021, vol. 205, issue C

Abstract: We investigate the optimal prize allocation in a multi-winner nested Tullock contest model with symmetric contestants who exhibit expectation-based loss aversion. We show that (i) multiple prizes can be optimal when contestants are sufficiently loss averse; (ii) all prizes should be equal in the optimal contest; and (iii) the number of prizes increases as the degree of loss aversion increases.

Keywords: Reference-dependent preferences; Expectation-based loss aversion; Prize allocation; Contest design (search for similar items in EconPapers)
JEL-codes: C72 D72 D81 D91 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:205:y:2021:i:c:s0165176521001981

DOI: 10.1016/j.econlet.2021.109921

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