Resource title

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

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Resource description

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.

Resource author

Matthias Kräkel

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Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/22979

Resource license

Adapt according to the presented license agreement and reference the original author.