Risk-Taking Tournaments: Theory and Experimental Evidence

Petra Nieken and Dirk Sliwka

No 3400, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We study risk-taking behavior in a simple two person tournament in a theoretical model as well as a laboratory experiment. First, a model is analyzed in which two agents simultaneously decide between a risky and a safe strategy and we allow for all possible degrees of correlation between the outcomes of the risky strategies. We show that risk-taking behavior crucially depends on this correlation as well as on the size of a potential lead of one of the contestants. We find that the experimental subjects acted mostly quite well in line with the derived theoretical predictions.

Keywords: risk-taking; competition; tournaments; experiment (search for similar items in EconPapers)
JEL-codes: C91 D23 M51 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2008-03
New Economics Papers: this item is included in nep-cbe, nep-exp and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Published - published in: Journal of Economic Psychology, 2010, 31 (3), 254-268

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Journal Article: Risk-taking tournaments - Theory and experimental evidence (2010)
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