Risk Aversion and Prudence in Contests

Beschreibung

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. Sec- ond, I show that for a certain range of parameters in asymmetric contests, higher risk-aversion will be a disadvantage if the agent is comparativelyprudent.

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Marco Sahm

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Prudence Risk Aversion Tullock Contest

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