Optimal Risk Taking in an Uneven Tournament Game with Risk Averse Players

Arbeitspapier

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 - an effort effect and a likelihood effect - 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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Bonn Econ Discussion Papers ; No. 4/2007

Classification and Topics

• Classification: Wirtschaft ; Noncooperative Games
• Subject: asymmetric equilibria ; rank-order tournaments ; risk taking ; Risiko ; Nichtkooperatives Spiel ; Risikoaversion ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Kräkel, Matthias
• Event: Veröffentlichung
• (who): University of Bonn, Bonn Graduate School of Economics (BGSE)
• (where): Bonn
• (when): 2007

Further information

• Handle: http://hdl.handle.net/10419/22979
• Last update: 10.03.2025, 11:44 AM CET