Risk Taking in Asymmetric Tournaments
AbstractA tournament is examined in which two agents with different abilities choose efforts as well as risks. According to the previous literature, the more (less) able agent should choose a low (high) risk strategy, because the first one does not want to imperil his favorable position, whereas the last one can only gain by increasing risk. We show that this is not necessarily true. Risk taking affects equilibrium efforts as well as winning probabilities. Depending on both effects diverse equilibria are possible. For example, the low and the high ability agent may both choose high risks or both choose low risks. Copyright Verein für Socialpolitik and Blackwell Publishing Ltd. 2004.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Verein für Socialpolitik in its journal German Economic Review.
Volume (Year): 5 (2004)
Issue (Month): 1 (02)
Contact details of provider:
Web page: http://www.blackwellpublishing.com/journal.asp?ref=1465-6485
More information through EDIRC
Other versions of this item:
- D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
- J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
- M12 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - Personnel Management; Executives; Executive Compensation
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Ronald G. Ehrenberg & Michael L. Bognanno, 1990. "The incentive effects of tournaments revisited: Evidence from the European PGA tour," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 43(3), pages 74-88, February.
- Ronald G. Ehrenberg & Michael L. Bognanno, 1988.
"Do Tournaments Have Incentive Effects?,"
NBER Working Papers
2638, National Bureau of Economic Research, Inc.
- Glazer, Amihai & Hassin, Refael, 1988. "Optimal Contests," Economic Inquiry, Western Economic Association International, vol. 26(1), pages 133-43, January.
- Hvide, H.K., 1999.
"Tournament Rewards and Risk Taking,"
32-99, Tel Aviv.
- Hans K. Hvide, 2000. "Tournament Rewards and Risk Taking," Econometric Society World Congress 2000 Contributed Papers 0163, Econometric Society.
- Eriksson, Tor, 1999. "Executive Compensation and Tournament Theory: Empirical Tests on Danish Data," Journal of Labor Economics, University of Chicago Press, vol. 17(2), pages 262-80, April.
- Baker, George & Gibbs, Michael & Holmstrom, Bengt, 1994. "The Wage Policy of a Firm," The Quarterly Journal of Economics, MIT Press, vol. 109(4), pages 921-55, November.
- Lazear, Edward P & Rosen, Sherwin, 1981.
"Rank-Order Tournaments as Optimum Labor Contracts,"
Journal of Political Economy,
University of Chicago Press, vol. 89(5), pages 841-64, October.
- Hoffler, Felix & Sliwka, Dirk, 2003. "Do new brooms sweep clean? When and why dismissing a manager increases the subordinates' performance," European Economic Review, Elsevier, vol. 47(5), pages 877-890, October.
- Mueller-Langer, Frank & Andreoli-Versbach, Patrick, 2013. "Leading-effect vs. Risk-taking in Dynamic Tournaments: Evidence from a Real-life Randomized Experiment," Discussion Papers in Economics 15452, University of Munich, Department of Economics.
- Eriksen, Kristoffer & Kvaløy, Ola & Olsen, Trond, 2008.
"Tournaments with price-setting agents,"
UiS Working Papers in Economics and Finance
2009/5, University of Stavanger.
- Kräkel, Matthias, 2008.
"Optimal risk taking in an uneven tournament game with risk averse players,"
Journal of Mathematical Economics,
Elsevier, vol. 44(11), pages 1219-1231, December.
- Matthias Kräkel, 2007. "Optimal Risk Taking in an Uneven Tournament Game with Risk Averse Players," Bonn Econ Discussion Papers bgse4_2007, University of Bonn, Germany.
- Kräkel, Matthias, 2007. "Optimal Risk Taking in an Uneven Tournament Game with Risk Averse Players," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 200, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
- Matthias Kräkel & Petra Nieken & Judith Przemeck, 2008.
"Risk Taking in Winner-Take-All Competition,"
Bonn Econ Discussion Papers
bgse7_2008, University of Bonn, Germany.
- Kräkel, Matthias & Nieken, Petra & Przemeck, Judith, 2008. "Risk Taking in Winner-Take-All Competition," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 233, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
- Kräkel, Matthias & Schöttner, Anja, 2010. "Technology choice, relative performance pay, and worker heterogeneity," Journal of Economic Behavior & Organization, Elsevier, vol. 76(3), pages 748-758, December.
- Christian Grund & Oliver Gurtler, 2005.
"An empirical study on risk-taking in tournaments,"
Applied Economics Letters,
Taylor & Francis Journals, vol. 12(8), pages 457-461.
- Konrad, Kai A., 2005. "Tournaments and Multiple Productive Inputs: The Case of Performance Enhancing Drugs," IZA Discussion Papers 1844, Institute for the Study of Labor (IZA).
- Nieken, Petra & Sliwka, Dirk, 2008.
"Risk-Taking Tournaments: Theory and Experimental Evidence,"
IZA Discussion Papers
3400, Institute for the Study of Labor (IZA).
- Nieken, Petra & Sliwka, Dirk, 2010. "Risk-taking tournaments - Theory and experimental evidence," Journal of Economic Psychology, Elsevier, vol. 31(3), pages 254-268, June.
- Eriksen, Kristoffer W. & Kvaløy, Ola, 2014.
"Myopic risk-taking in tournaments,"
Journal of Economic Behavior & Organization,
Elsevier, vol. 97(C), pages 37-46.
- Nieken, Petra & Stegh, Michael, 2010. "Incentive Effects in Asymmetric Tournaments Empirical Evidence from the German Hockey League," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 305, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.