Risk-Taking Tournaments: Theory and Experimental Evidence
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.
|Date of creation:||Mar 2008|
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|Publication status:||published in: Journal of Economic Psychology, 2010, 31 (3), 254-268|
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