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Liu, Linqun and Treich, Nicolas
(2021)
Optimality of winner-take-all contests: the role of attitudes toward risk.
Journal of Risk and Uncertainty, vol. 63 (n°1).
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Abstract
This paper studies the role of risk attitudes in determining the optimality of winner-take-all contests. We compare the typical singlewinner lottery contest with two alternatives, both spreading the rewards to more players: through holding multiple prize-giving lottery competitions or through guaranteeing a bottom prize for the losers. In the first
comparison, we find that the multiple-competition contest is as effective as the winner-take-all contest when the contestants are risk neutral, but the former induces more effort than the latter when the contestants are both
risk averse and prudent. In the second comparison, we find that the contest with a bottom prize is always dominated by the winner-take-all contest when the contestants are risk neutral, but the former could have an advantage over the latter when the contestants are both risk averse and
prudent, and it is more likely so as the contestants become more prudent.
| Item Type: | Article |
|---|---|
| Language: | English |
| Date: | 6 October 2021 |
| Refereed: | Yes |
| Place of Publication: | New York |
| Uncontrolled Keywords: | contests, winner take all, multiple prizes, risk aversion, prudence |
| JEL Classification: | C72 - Noncooperative Games D72 - Economic Models of Political Processes - Rent-Seeking, Elections, Legislatures, and Voting Behavior D81 - Criteria for Decision-Making under Risk and Uncertainty |
| Subjects: | B- ECONOMIE ET FINANCE |
| Divisions: | TSE-R (Toulouse) |
| Site: | UT1 |
| Date Deposited: | 25 Mar 2021 11:06 |
| Last Modified: | 06 Oct 2022 09:15 |
| OAI Identifier: | oai:tse-fr.eu:125360 |
| URI: | https://publications.ut-capitole.fr/id/eprint/42774 |
