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Risk-taking tournaments - Theory and experimental evidence

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  • Nieken, Petra
  • Sliwka, Dirk

Abstract

We 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.

Suggested Citation

  • Nieken, Petra & Sliwka, Dirk, 2010. "Risk-taking tournaments - Theory and experimental evidence," Journal of Economic Psychology, Elsevier, vol. 31(3), pages 254-268, June.
    • Handle: RePEc:eee:joepsy:v:31:y:2010:i:3:p:254-268
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    More about this item

    Keywords

    Tournaments Competition Risk-taking Experiment;

    JEL classification:

    • M51 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - 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

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