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Gambling in contests with heterogeneous loss constraints

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  • Seel, Christian

Abstract

I study the impact of asymmetric loss constraints on risk-taking behavior in the contest model of Seel and Strack (2013). I derive the unique Nash equilibrium outcome, the equilibrium payoffs and comparative statics about the bankruptcy risk.

Suggested Citation

  • Seel, Christian, 2015. "Gambling in contests with heterogeneous loss constraints," Economics Letters, Elsevier, vol. 136(C), pages 154-157.
    • Handle: RePEc:eee:ecolet:v:136:y:2015:i:c:p:154-157
    DOI: 10.1016/j.econlet.2015.09.002
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    References listed on IDEAS

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    1. Han Feng & David Hobson, 2015. "Gambling in contests modelled with diffusions," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 38(1), pages 21-37, April.
    2. Seel, Christian & Strack, Philipp, 2013. "Gambling in contests," Journal of Economic Theory, Elsevier, vol. 148(5), pages 2033-2048.
    3. Basak, Suleyman & Shapiro, Alexander, 2001. "Value-at-Risk-Based Risk Management: Optimal Policies and Asset Prices," The Review of Financial Studies, Society for Financial Studies, vol. 14(2), pages 371-405.
    4. Seel, Christian, 2014. "The value of information in asymmetric all-pay auctions," Games and Economic Behavior, Elsevier, vol. 86(C), pages 330-338.
    5. Daniel Kahneman & Amos Tversky, 2013. "Prospect Theory: An Analysis of Decision Under Risk," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 6, pages 99-127, World Scientific Publishing Co. Pte. Ltd..
    6. Michael R. Baye & Dan Kovenock & Casper G. Vries, 1996. "The all-pay auction with complete information," Springer Books, in: Roger D. Congleton & Arye L. Hillman & Kai A. Konrad (ed.), 40 Years of Research on Rent Seeking 1, pages 209-223, Springer.
    7. Gary Smith & Michael Levere & Robert Kurtzman, 2009. "Poker Player Behavior After Big Wins and Big Losses," Management Science, INFORMS, vol. 55(9), pages 1547-1555, September.
    8. Konrad, Kai A., 2002. "Investment in the absence of property rights; the role of incumbency advantages," European Economic Review, Elsevier, vol. 46(8), pages 1521-1537, September.
    9. Arye Hillman & Dov Samet, 1987. "Dissipation of contestable rents by small numbers of contenders," Public Choice, Springer, vol. 54(1), pages 63-82, January.
    10. Ron Siegel, 2009. "All-Pay Contests," Econometrica, Econometric Society, vol. 77(1), pages 71-92, January.
    11. Nicholas Barberis, 2012. "A Model of Casino Gambling," Management Science, INFORMS, vol. 58(1), pages 35-51, January.
    12. Richard H. Thaler & Eric J. Johnson, 1990. "Gambling with the House Money and Trying to Break Even: The Effects of Prior Outcomes on Risky Choice," Management Science, INFORMS, vol. 36(6), pages 643-660, June.
    13. Kirkegaard, René, 2012. "Favoritism in asymmetric contests: Head starts and handicaps," Games and Economic Behavior, Elsevier, vol. 76(1), pages 226-248.
    14. Ron Siegel, 2010. "Asymmetric Contests with Conditional Investments," American Economic Review, American Economic Association, vol. 100(5), pages 2230-2260, December.
    15. Ron Siegel, 2014. "Asymmetric Contests with Head Starts and Nonmonotonic Costs," American Economic Journal: Microeconomics, American Economic Association, vol. 6(3), pages 59-105, August.
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    Citations

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    Cited by:

    1. Whitmeyer, Mark, 2023. "Submission costs in risk-taking contests," Games and Economic Behavior, Elsevier, vol. 142(C), pages 101-112.
    2. Embrey, Matthew & Seel, Christian & Philipp Reiss, J., 2024. "Gambling in risk-taking contests: Experimental evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 221(C), pages 570-585.
    3. Adnan M. S. Fakir & Yiwei Qian & Naveen Sunder, 2023. "Gender Differences in Preference for Non-pecuniary Benefits in the Labour Market. Experimental Evidence from an Online Freelancing Platform.," Working Paper Series 0623, Department of Economics, University of Sussex Business School.
    4. Marcel Nutz & Yuchong Zhang, 2021. "Mean Field Contest with Singularity," Papers 2103.04219, arXiv.org.
    5. Marcel Nutz & Yuchong Zhang, 2021. "Reward Design in Risk-Taking Contests," Papers 2102.03417, arXiv.org, revised Nov 2021.
    6. Mark Whitmeyer, 2021. "Submission Fees in Risk-Taking Contests," Papers 2108.13506, arXiv.org.

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    More about this item

    Keywords

    Contest; Risk-taking; Credit line;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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