Competition and risk-taking

Oliver Gürtler, Lennart Struth and Max Thon

European Economic Review, 2023, vol. 160, issue C

Abstract: In many situations, agents take risks by choosing an action that increases their performance immediately, but that potentially leads to a large loss. The current paper studies how such risk-taking behavior depends on the level of competition that the agents face. We study a tournament model and we find that more intense competition, measured by the number of competitors as well as their relative standing, induces agents to take higher risks. We use a rich panel data set on professional biathlon competitions as well as survey data from professional biathletes to confirm the model predictions. Finally, we discuss implications for organizational decision-making.

Keywords: Risk-taking; Competition; Tournament; Incentives; Biathlon (search for similar items in EconPapers)
JEL-codes: M51 M52 Z22 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Working Paper: Competition and Risk-Taking (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:160:y:2023:i:c:s0014292123002209

DOI: 10.1016/j.euroecorev.2023.104592

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