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The Contest Winner: Gifted or Venturesome?

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  • Marco Sahm

Abstract

This paper examines the chance of winning a Tullock-contest when participants differ in both their talent and their attitude towards risk. For the case of CARA preferences, it is shown that the winning probability may be higher for a low-skilled agent with a low degree of risk aversion than for a high-skilled agent with a high degree of risk-aversion. Such an outcome often is undesirable. It will occur if and only if the agents’ ratio of degrees of risk aversion is larger than their ratio of skill levels and the rent of the contest is sufficiently high.

Suggested Citation

  • Marco Sahm, 2010. "The Contest Winner: Gifted or Venturesome?," CESifo Working Paper Series 3285, CESifo.
    • Handle: RePEc:ces:ceswps:_3285
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    References listed on IDEAS

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    Cited by:

    1. March, Christoph & Sahm, Marco, 2017. "Asymmetric discouragement in asymmetric contests," Economics Letters, Elsevier, vol. 151(C), pages 23-27.

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    More about this item

    Keywords

    selection contest; asymmetric players; risk aversion;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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