Risk Taking in Selection Contests
Hans K. Hvide
University of Bergen - Department of Economics; University of Aberdeen - Business School; Centre for Economic Policy Research (CEPR); Institute for the Study of Labor (IZA)
Eirik G. Kristiansen
NHH Norwegian School of Economics; Norwegian School of Economics (NHH) - Department of Economics
November 27, 2000
We study a tournament/contest where the strategic variable is degree of risk rather than amount of effort. The degree to which the most able contestants win (selection efficiency) is examined. We show that the selection efficiency of a contest may be improved by limiting the competition in two ways; a) by having a small number of contestants, and b) by restricting contestant quality. The results may contribute to our understanding of such diverse phenomena as promotion processes in large firms, selection of fund managers and research tournaments.
Number of Pages in PDF File: 31
JEL Classification: C44, D29, D83, J41working papers series
Date posted: November 15, 1999
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