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Gambling in risk-taking contests: Experimental evidence

Embrey, Matthew ; Seel, Christian ; Philipp Reiss, J. 1
1 Institut für Volkswirtschaftslehre (ECON), Karlsruher Institut für Technologie (KIT)

Abstract:

This paper experimentally investigates risk taking in contest schemes by implementing a stopping task based on Seel and Strack (2013). In this stylized setting, managers with contest payoffs have an incentive to delay halting projects with a negative expectation, with the induced inefficiency being highest for a moderately negative drift. The experiment systematically varies the negative drift (between-subjects) and the payoff incentives (within-subject). We find evidence for risk taking in all our treatment conditions, with the non-monotonicity at least as pronounced as predicted. Contrary to the theoretical predictions, a similar pattern of behaviour persists even without contest incentives, suggesting contest incentives are not the only driver of risk-taking behaviour. Instead, observed behaviour violates expected utility maximization and is consistent with some intrinsic motivation for taking risk and myopic reasoning about the opponent. We explore the interplay between intrinsic incentives and the payment scheme and find that contest
incentives might crowd out an intrinsic inclination to risk-taking.


Verlagsausgabe §
DOI: 10.5445/IR/1000170417
Veröffentlicht am 03.05.2024
Originalveröffentlichung
DOI: 10.1016/j.jebo.2024.02.024
Dimensions
Zitationen: 1
Cover der Publikation
Zugehörige Institution(en) am KIT Institut für Volkswirtschaftslehre (ECON)
Publikationstyp Zeitschriftenaufsatz
Publikationsmonat/-jahr 05.2024
Sprache Englisch
Identifikator ISSN: 0167-2681, 1879-1751
KITopen-ID: 1000170417
Erschienen in Journal of Economic Behavior and Organization
Verlag Elsevier
Band 221
Seiten 570 – 585
Vorab online veröffentlicht am 11.04.2024
Nachgewiesen in Dimensions
Scopus
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