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Gambling in contests with heterogeneous loss constraints

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  • Seel, Christian

Abstract

I study the impact of asymmetric loss constraints on risk-taking behavior in the contest model of Seel and Strack (2013). I derive the unique Nash equilibrium outcome, the equilibrium payoffs and comparative statics about the bankruptcy risk.

Suggested Citation

  • Seel, Christian, 2015. "Gambling in contests with heterogeneous loss constraints," Economics Letters, Elsevier, vol. 136(C), pages 154-157.
    • Handle: RePEc:eee:ecolet:v:136:y:2015:i:c:p:154-157
    DOI: 10.1016/j.econlet.2015.09.002
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    References listed on IDEAS

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    1. Han Feng & David Hobson, 2015. "Gambling in contests modelled with diffusions," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 38(1), pages 21-37, April.
    2. Gary Smith & Michael Levere & Robert Kurtzman, 2009. "Poker Player Behavior After Big Wins and Big Losses," Management Science, INFORMS, vol. 55(9), pages 1547-1555, September.
    3. Dan Kovenock & Michael R. Baye & Casper G. de Vries, 1996. "The all-pay auction with complete information (*)," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 8(2), pages 291-305.
    4. Konrad, Kai A., 2002. "Investment in the absence of property rights; the role of incumbency advantages," European Economic Review, Elsevier, vol. 46(8), pages 1521-1537, September.
    5. Arye Hillman & Dov Samet, 1987. "Dissipation of contestable rents by small numbers of contenders," Public Choice, Springer, vol. 54(1), pages 63-82, January.
    6. Seel, Christian, 2014. "The value of information in asymmetric all-pay auctions," Games and Economic Behavior, Elsevier, vol. 86(C), pages 330-338.
    7. Ron Siegel, 2009. "All-Pay Contests," Econometrica, Econometric Society, vol. 77(1), pages 71-92, January.
    8. Richard H. Thaler & Eric J. Johnson, 1990. "Gambling with the House Money and Trying to Break Even: The Effects of Prior Outcomes on Risky Choice," Management Science, INFORMS, vol. 36(6), pages 643-660, June.
    9. Kirkegaard, René, 2012. "Favoritism in asymmetric contests: Head starts and handicaps," Games and Economic Behavior, Elsevier, vol. 76(1), pages 226-248.
    10. Ron Siegel, 2010. "Asymmetric Contests with Conditional Investments," American Economic Review, American Economic Association, vol. 100(5), pages 2230-2260, December.
    11. Basak, Suleyman & Shapiro, Alexander, 2001. "Value-at-Risk-Based Risk Management: Optimal Policies and Asset Prices," Review of Financial Studies, Society for Financial Studies, vol. 14(2), pages 371-405.
    12. Daniel Kahneman & Amos Tversky, 2013. "Prospect Theory: An Analysis of Decision Under Risk," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 6, pages 99-127, World Scientific Publishing Co. Pte. Ltd..
    13. Seel, Christian & Strack, Philipp, 2013. "Gambling in contests," Journal of Economic Theory, Elsevier, vol. 148(5), pages 2033-2048.
    14. Nicholas Barberis, 2012. "A Model of Casino Gambling," Management Science, INFORMS, vol. 58(1), pages 35-51, January.
    15. Ron Siegel, 2014. "Asymmetric Contests with Head Starts and Nonmonotonic Costs," American Economic Journal: Microeconomics, American Economic Association, vol. 6(3), pages 59-105, August.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Matthew Embrey & Christian Seel & J. Philipp Reiss, 2020. "Gambling in Risk-Taking Contests: Experimental Evidence," Working Paper Series 1620, Department of Economics, University of Sussex Business School.
    2. repec:sus:susewp:0623 is not listed on IDEAS
    3. Marcel Nutz & Yuchong Zhang, 2021. "Mean Field Contest with Singularity," Papers 2103.04219, arXiv.org.
    4. Marcel Nutz & Yuchong Zhang, 2021. "Reward Design in Risk-Taking Contests," Papers 2102.03417, arXiv.org, revised Nov 2021.
    5. Mark Whitmeyer, 2021. "Submission Fees in Risk-Taking Contests," Papers 2108.13506, arXiv.org.

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    More about this item

    Keywords

    Contest; Risk-taking; Credit line;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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