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Risk attitudes and heterogeneity in simultaneous and sequential contests

Listed author(s):
  • Jindapon, Paan
  • Yang, Zhe
Registered author(s):

    We prove existence and uniqueness of equilibrium in rent-seeking contests in which players are heterogeneous in both risk preferences and production technology. Given identical linear production technology, if the number of risk-loving players is large enough, the aggregate investment in equilibrium will exceed the rent and all risk-neutral and risk-averse players will exit the contest. In simultaneous and sequential contests with two players, we can identify the favorite and underdog based on both players’ preference parameters. Our theoretical results suggest that subjects in some recent contest experiments behaved as if they were risk-loving.

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    File URL: http://www.sciencedirect.com/science/article/pii/S016726811730104X
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    Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

    Volume (Year): 138 (2017)
    Issue (Month): C ()
    Pages: 69-84

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    Handle: RePEc:eee:jeborg:v:138:y:2017:i:c:p:69-84
    DOI: 10.1016/j.jebo.2017.04.011
    Contact details of provider: Web page: http://www.elsevier.com/locate/jebo

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