Risk-Taking Tournaments: Theory and Experimental Evidence
AbstractWe 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.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3400.
Length: 31 pages
Date of creation: Mar 2008
Date of revision:
Publication status: published in: Journal of Economic Psychology, 2010, 31 (3), 254-268
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Other versions of this item:
- Nieken, Petra & Sliwka, Dirk, 2010. "Risk-taking tournaments - Theory and experimental evidence," Journal of Economic Psychology, Elsevier, vol. 31(3), pages 254-268, June.
- M51 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - Firm Employment Decisions; Promotions
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
- D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-03-25 (All new papers)
- NEP-CBE-2008-03-25 (Cognitive & Behavioural Economics)
- NEP-EXP-2008-03-25 (Experimental Economics)
- NEP-UPT-2008-03-25 (Utility Models & Prospect Theory)
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