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On the Choice of Risk and Effort in Tournaments-Experimental Evidence

  • Petra Nieken

"We investigate a simple two-person tournament in a controlled laboratory experiment. Each player chooses between two distributions of random shocks. After observing the overall risk, both players decide simultaneously on their effort. Theory predicts both players should choose the distribution with the higher variance of random shock, as this minimizes equilibrium effort. We show that the effort exerted is sensitive towards risk. The agents exert less effort if the random shock is high. However, agents do not learn to commit themselves by choosing a high risk in our experiment." Copyright (c) 2010 Wiley Periodicals, Inc..

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Article provided by Wiley Blackwell in its journal Journal of Economics & Management Strategy.

Volume (Year): 19 (2010)
Issue (Month): 3 (09)
Pages: 811-840

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Handle: RePEc:bla:jemstr:v:19:y:2010:i:3:p:811-840
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