The Effect of Competition on Risk Taking in Contests
We investigate, theoretically and experimentally, the effect of competition on risk taking in a contest in which players only decide on the level of risk they wish to take. Taking more risk implies a chance of a higher performance, but also implies a higher chance of failure. We vary the level of co...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
| Published: |
MDPI AG
2018-09-01
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| Series: | Games |
| Subjects: | |
| Online Access: | http://www.mdpi.com/2073-4336/9/3/72 |
| Summary: | We investigate, theoretically and experimentally, the effect of competition on risk taking in a contest in which players only decide on the level of risk they wish to take. Taking more risk implies a chance of a higher performance, but also implies a higher chance of failure. We vary the level of competition in two ways: by varying the number of players (2 players versus 8 players), and by varying the sensitivity of the contest to differences in performance (lottery contest versus all-pay auction). Our results show that there is a significant interaction effect between the two treatments, suggesting that players are particularly prone to take more risks if both the number of players and the sensitivity to performance are higher. |
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| ISSN: | 2073-4336 |