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Multi-prize contests with expectation-based loss-averse players

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  • Fu, Qiang
  • Wang, Xiruo
  • Zhu, Yuxuan

Abstract

We investigate the optimal prize allocation in a multi-winner nested Tullock contest model with symmetric contestants who exhibit expectation-based loss aversion. We show that (i) multiple prizes can be optimal when contestants are sufficiently loss averse; (ii) all prizes should be equal in the optimal contest; and (iii) the number of prizes increases as the degree of loss aversion increases.

Suggested Citation

  • Fu, Qiang & Wang, Xiruo & Zhu, Yuxuan, 2021. "Multi-prize contests with expectation-based loss-averse players," Economics Letters, Elsevier, vol. 205(C).
    • Handle: RePEc:eee:ecolet:v:205:y:2021:i:c:s0165176521001981
    DOI: 10.1016/j.econlet.2021.109921
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    References listed on IDEAS

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    Cited by:

    1. Yuanhao Zhang, 2023. "Contest in Multitasking: An Evidence from Chinese County Officials' Promotion Assessment," Papers 2302.08691, arXiv.org.
    2. Francesco Fallucchi & Francesco Trevisan, 2023. "Tullock Contest with Desert Concerns," Working Papers 2023: 31, Department of Economics, University of Venice "Ca' Foscari".
    3. Fu, Qiang & Lyu, Youji & Wu, Zenan & Zhang, Yuanjie, 2022. "Expectations-based loss aversion in contests," Games and Economic Behavior, Elsevier, vol. 133(C), pages 1-27.

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    More about this item

    Keywords

    Reference-dependent preferences; Expectation-based loss aversion; Prize allocation; Contest design;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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