Risk Aversion and Prudence in Contests

Marco Sahm

No 6417, CESifo Working Paper Series from CESifo

Abstract: I examine the impact of risk preferences on efforts and winning probabilities in generalised Tullock contests between two players. The theoretical analysis yields two main results. First, I specify a sufficient condition on the agents’ comparative prudence under which a higher common level of risk aversion leads to lower aggregate effort in symmetric contests. Second, I show that for a certain range of parameters in asymmetric contests, higher risk-aversion will be a disadvantage if the agent is comparatively prudent.

Keywords: Tullock contest; risk aversion; prudence (search for similar items in EconPapers)
JEL-codes: C72 D72 (search for similar items in EconPapers)
Date: 2017
New Economics Papers: this item is included in nep-mic and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

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