 Optimality of winner-take-all contests: the role of attitudes toward riskLiqun Liu and
Nicolas Treich
Post-Print from HAL Abstract: This paper studies the role of risk attitudes in determining the optimality of winner-take-all contests. We compare the typical single-winner lottery contest with two alternatives, both spreading the rewards to more players: through holding multiple prize-giving lottery competitions or through guaranteeing a bottom prize for the losers. In the first comparison, we find that the multiple-competition contest is as effective as the winner-take-all contest when the contestants are risk neutral, but the former induces more effort than the latter when the contestants are both risk averse and prudent. In the second comparison, we find that the contest with a bottom prize is always dominated by the winner-take-all contest when the contestants are risk neutral, but the former could have an advantage over the latter when the contestants are both risk averse and prudent, and it is more likely so as the contestants become more prudent. Keywords: Contests; Winner-take-all; Multiple prizes; Risk aversion; Prudence (search for similar items in EconPapers) Published in Journal of Risk and Uncertainty, 2021, 63 (1), pp.1-25. ⟨10.1007/s11166-021-09355-8⟩ There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03722083 DOI: 10.1007/s11166-021-09355-8 Access Statistics for this paper More papers in Post-Print from HAL |
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