Contests as selection mechanisms: The impact of risk aversion
Faculty/Professorship: | Economic Theory |
Author(s): | March, Christoph ![]() ![]() |
Title of the Journal: | Journal of Economic Behavior & Organization |
ISSN: | 0167-2681 |
Publisher Information: | Amsterdam [u.a.] : Elsevier |
Year of publication: | 2018 |
Volume: | 150 |
Pages: | 114-131 |
Language(s): | English |
DOI: | 10.1016/j.jebo.2018.03.020 |
Abstract: | We investigate how individual risk preferences affect the likelihood of selecting the more able contestant within a two-player Tullock contest. Our theoretical model yields two main predictions: First, an increase in the risk aversion of a player worsens her odds unless she already has a sufficiently large advantage. Second, if the prize money is sufficiently large, a less able but less risk averse contestant can achieve an equal or even higher probability of winning than a more able but more risk averse opponent. In a laboratory experiment we confirm both, the non-monotonic impact and the compensating effect of risk aversion on winning probabilities. Our results suggest a novel explanation for the gender gap and the optimality of limited monetary incentives in selection contests. |
Keywords: | Selection contest, Risk aversion, Competitive balance, Gender gap |
Peer Reviewed: | Ja |
International Distribution: | Ja |
Type: | Article |
URI: | https://fis.uni-bamberg.de/handle/uniba/44052 |
Year of publication: | 28. June 2018 |

originated at the
University of Bamberg
University of Bamberg