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Marco Sahm
''Risk aversion and prudence in contests''
( 2017, Vol. 37 No.2 )
I examine the impact of risk preferences on efforts and winning probabilities in generalized Tullock contests between two players. The theoretical analysis yields two main results. First, in symmetric contests, a higher common level of the agents´ risk aversion will lead to lower aggregate effort if it comes along with an increase in downside risk aversion. Second, in many asymmetric contests, higher risk-aversion will be a disadvantage if the agent is also more downside risk-averse.
Keywords: Tullock contest, risk aversion, prudence, downside risk aversion
JEL: D7 - Analysis of Collective Decision-Making: General
Manuscript Received : Mar 20 2017 Manuscript Accepted : May 25 2017

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