Risk Aversion and Prudence in Contests

12 Pages Posted: 8 May 2017

Date Written: April 04, 2017

Abstract

I examine the impact of risk preferences on efforts and winning probabilities in generalised Tullock contests between two players. The theoretical analysis yields two main results. First, I specify a sufficient condition on the agents’ comparative prudence under which a higher common level of risk aversion leads to lower aggregate effort in symmetric contests. Second, I show that for a certain range of parameters in asymmetric contests, higher risk-aversion will be a disadvantage if the agent is comparatively prudent.

Keywords: Tullock contest, risk aversion, prudence

JEL Classification: C720, D720

Suggested Citation

Sahm, Marco, Risk Aversion and Prudence in Contests (April 04, 2017). CESifo Working Paper Series No. 6417, Available at SSRN: https://ssrn.com/abstract=2964877 or http://dx.doi.org/10.2139/ssrn.2964877

Marco Sahm (Contact Author)

University of Munich ( email )

Geschwister-Scholl-Platz 1
Munich, DE Bavaria 80539
Germany

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
70
Abstract Views
417
Rank
594,428
PlumX Metrics