Risk and risk aversion effects in contests with contingent payments
Liqun Liu (),
Jack Meyer (),
Andrew J. Rettenmaier () and
Thomas R. Saving ()
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Liqun Liu: Texas A&M University
Andrew J. Rettenmaier: Texas A&M University
Thomas R. Saving: Texas A&M University
Journal of Risk and Uncertainty, 2018, vol. 56, issue 3, 289-305
Abstract Contests by their very nature involve risk, winning and losing are both possible, and the gain from winning can itself be uncertain. The participants in a contest use resources to increase their chance of winning. The main focus of this analysis is on the effects of risk aversion and risk in contests where only winners pay for resources used to compete. When payment is contingent on winning, the effect of risk aversion is in the opposite direction of what occurs when costs are paid by both winners and losers. A number of contests observed in the marketplace that exhibit this contingent payment property are discussed.
Keywords: Risk aversion; Contests; Contingent payments; Self-protection; Ross risk aversion; Downside risk aversion; C72; D72; D81 (search for similar items in EconPapers)
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