Risk Taking in Winner-Take-All Competition

Arbeitspapier

We analyze a two-stage game between two heterogeneous players. At stage one, common risk is chosen by one of the players. At stage two, both players observe the given level of risk and simultaneously invest in a winner-take-all competition. The game is solved theoretically and then tested by using laboratory experiments. We find three effects that determine risk taking at stage one - an effort effect, a likelihood effect and a reversed likelihood effect. For the likelihood effect, risk taking and investments are clearly in line with theory. Pairwise comparison shows that the effort effect seems to be more relevant than the reversed likelihood effect when taking risk.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: SFB/TR 15 Discussion Paper ; No. 233

Classification and Topics

• Classification: Wirtschaft ; Personnel Economics: Firm Employment Decisions; Promotions ; Design of Experiments: Laboratory, Individual ; Organizational Behavior; Transaction Costs; Property Rights
• Subject: Tournaments ; Competition ; Risk-Taking ; Experiment

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Kräkel, Matthias ; Nieken, Petra ; Przemeck, Judith
• Event: Veröffentlichung
• (who): Sonderforschungsbereich/Transregio 15 - Governance and the Efficiency of Economic Systems (GESY)
• (where): München
• (when): 2008

Further information

• DOI: doi:10.5282/ubm/epub.13319
• Handle: http://hdl.handle.net/10419/94021
• URN: urn:nbn:de:bvb:19-epub-13319-5
• Last update: 10.03.2025, 11:43 AM CET