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The Effect of Competition on Risk Taking in Contests

1
Department of Economics and Statistics, University of Siena, 53100 Siena, Italy
2
Department of Economics and CentER, Tilburg University, 5000 LE Tilburg, The Netherlands
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Authors to whom correspondence should be addressed.
Games 2018, 9(3), 72; https://doi.org/10.3390/g9030072
Received: 15 July 2018 / Revised: 14 September 2018 / Accepted: 17 September 2018 / Published: 19 September 2018
(This article belongs to the Special Issue Economic Behavior and Game Theory)
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. View Full-Text
Keywords: risk taking; competition; contests; experiments risk taking; competition; contests; experiments
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Spadoni, L.; Potters, J. The Effect of Competition on Risk Taking in Contests. Games 2018, 9, 72.

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