Optimal Risk Taking in an Uneven Tournament Game with Risk Averse Players
We analyze the optimal choice of risk in a two-stage tournament game between two players that have different concave utility functions. At the first stage, both players simultaneously choose risk. At the second stage, both observe overall risk and simultaneously decide on effort or investment. The results show that those two effects which mainly determine risk taking â€” an effort effect and a likelihood effect â€” are strictly interrelated. This finding sharply contrasts with existing results on risk taking in tournament games with symmetric equilibrium efforts where such linkage can never arise. Hence, previous findings based on symmetry at the effort stage turn out to be nongeneric.
|Date of creation:||Apr 2007|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.sfbtr15.de/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Gibbons, Robert, 2005. "Four forma(lizable) theories of the firm?," Journal of Economic Behavior & Organization, Elsevier, vol. 58(2), pages 200-245, October.
- Robert Gibbons & Kevin Murphy, 1989.
"Relative Performance Evaluation for Chief Executive Officers,"
628, Princeton University, Department of Economics, Industrial Relations Section..
- Robert Gibbons & Kevin J. Murphy, 1990. "Relative performance evaluation for chief executive officers," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 43(3), pages 30-51, February.
- Robert Gibbons & Kevin J. Murphy, 1989. "Relative Performance Evaluation for Chief Executive Officers," NBER Working Papers 2944, National Bureau of Economic Research, Inc.
- Gibbons, R. & Murphy, K.J., 1989. "Relative Performance Evaluation For Chief Executive Officers," Working papers 532, Massachusetts Institute of Technology (MIT), Department of Economics.
- Hans K. Hvide, 2000.
"Tournament Rewards and Risk Taking,"
Econometric Society World Congress 2000 Contributed Papers
0163, Econometric Society.
- Amegashie, J. Atsu, 2007.
"American Idol: Should it be a Singing Contest or a Popularity Contest?,"
6465, University Library of Munich, Germany.
- J. Atsu Amegashie, 2007. "American Idol: should it be a singing contest or a popularity contest?," Economics Bulletin, AccessEcon, vol. 28(16), pages A0.
- J. Atsu Amegashie, 2009. "American Idol: should it be a singing contest or a popularity contest?," Journal of Cultural Economics, Springer, vol. 33(4), pages 265-277, November.
- J. Atsu Amegashie, 2007. "American Idol: Should it be a Singing Contest or a Popularity Contest?," Working Papers 0708, University of Guelph, Department of Economics and Finance.
- J. Atsu Amegashie, 2007. "American Idol: Should it be a Singing Contest or a Popularity Contest?," CESifo Working Paper Series 2171, CESifo Group Munich.
- Muller, Sigrid M. & Machina, Mark J., 1987. "Moment preferences and polynomial utility," Economics Letters, Elsevier, vol. 23(4), pages 349-353.
- Matthias Kräkel & Dirk Sliwka, 2004.
"Risk Taking in Asymmetric Tournaments,"
German Economic Review,
Verein für Socialpolitik, vol. 5(1), pages 103-116, 02.
- Brown, Keith C & Harlow, W V & Starks, Laura T, 1996. " Of Tournaments and Temptations: An Analysis of Managerial Incentives in the Mutual Fund Industry," Journal of Finance, American Finance Association, vol. 51(1), pages 85-110, March.
- repec:ebl:ecbull:v:28:y:2007:i:16:p:a0 is not listed on IDEAS
- Taylor, Jonathan, 2003. "Risk-taking behavior in mutual fund tournaments," Journal of Economic Behavior & Organization, Elsevier, vol. 50(3), pages 373-383, March.
- Warneryd, Karl, 2000.
"In Defense of Lawyers: Moral Hazard as an Aid to Cooperation,"
Games and Economic Behavior,
Elsevier, vol. 33(1), pages 145-158, October.
- Wärneryd, Karl, 1996. "In Defense of Lawyers. Moral Hazard as an Aid to Cooperation," SSE/EFI Working Paper Series in Economics and Finance 126, Stockholm School of Economics.
- Christian Grund & Oliver Gürtler, 2005.
"An Empirical Study on Risk Taking in Tournaments,"
Bonn Econ Discussion Papers
bgse6_2005, University of Bonn, Germany.
- Hvide, H.K. & Kristiansen, E.G., 1999.
"Risk Taking in Selection Contests,"
5-99, Tel Aviv.
- Knoeber, Charles R & Thurman, Walter N, 1994. "Testing the Theory of Tournaments: An Empirical Analysis of Broiler Production," Journal of Labor Economics, University of Chicago Press, vol. 12(2), pages 155-79, April.
- Anja Schöttner, 2005.
"Fixed-Prize Tournaments versus First-Price Auctions in Innovation Contests,"
SFB 649 Discussion Papers
SFB649DP2005-041, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
- Anja Schöttner, 2008. "Fixed-prize tournaments versus first-price auctions in innovation contests," Economic Theory, Springer, vol. 35(1), pages 57-71, April.
- Edward P. Lazear & Sherwin Rosen, 1979.
"Rank-Order Tournaments as Optimum Labor Contracts,"
NBER Working Papers
0401, National Bureau of Economic Research, Inc.
- Baker, George & Gibbs, Michael & Holmstrom, Bengt, 1994. "The Wage Policy of a Firm," The Quarterly Journal of Economics, MIT Press, vol. 109(4), pages 921-55, November.
- Anil Gaba & Ajay Kalra, 1999. "Risk Behavior in Response to Quotas and Contests," Marketing Science, INFORMS, vol. 18(3), pages 417-434.
- Dragon, Robert & Garvey, Gerald T. & Turnbull, Geoffrey K., 1996. "A collective tournament," Economics Letters, Elsevier, vol. 50(2), pages 223-227, February.
- Chevalier, Judith & Ellison, Glenn, 1997.
"Risk Taking by Mutual Funds as a Response to Incentives,"
Journal of Political Economy,
University of Chicago Press, vol. 105(6), pages 1167-1200, December.
- Chevalier, J. & Ellison, G., 1996. "Risk Taking by Mutual Funds as a Response to Incentives," Working papers 96-3, Massachusetts Institute of Technology (MIT), Department of Economics.
- Judith A. Chevalier & Glenn D. Ellison, 1995. "Risk Taking by Mutual Funds as a Response to Incentives," NBER Working Papers 5234, National Bureau of Economic Research, Inc.
- Konrad, Kai A., 2007.
"Strategy in contests: an introduction
[Strategie in Turnieren – eine Einführung]," Discussion Papers, Research Unit: Market Processes and Governance SP II 2007-01, Social Science Research Center Berlin (WZB).
- O'Keeffe, Mary & Viscusi, W Kip & Zeckhauser, Richard J, 1984. "Economic Contests: Comparative Reward Schemes," Journal of Labor Economics, University of Chicago Press, vol. 2(1), pages 27-56, January.
- Kong-Pin Chen, 2003. "Sabotage in Promotion Tournaments," Journal of Law, Economics and Organization, Oxford University Press, vol. 19(1), pages 119-140, April.
- Steven Tadelis, 2002. "The Market for Reputations as an Incentive Mechanism," Journal of Political Economy, University of Chicago Press, vol. 110(4), pages 854-882, August.
- Schmalensee, Richard, 1976. "A Model of Promotional Competition in Oligopoly," Review of Economic Studies, Wiley Blackwell, vol. 43(3), pages 493-507, October.
- Stefan Szymanski, 2003. "The Economic Design of Sporting Contests," Journal of Economic Literature, American Economic Association, vol. 41(4), pages 1137-1187, December.
- Dixit, Avinash K, 1987. "Strategic Behavior in Contests," American Economic Review, American Economic Association, vol. 77(5), pages 891-98, December.
When requesting a correction, please mention this item's handle: RePEc:trf:wpaper:200. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Tamilla Benkelberg)
If references are entirely missing, you can add them using this form.