Gambling in contests

A-Tier
Journal: Journal of Economic Theory
Year: 2013
Volume: 148
Issue: 5
Pages: 2033-2048

Score contribution per author:

2.011 = (α=2.01 / 2 authors) × 2.0x A-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

Abstract

This paper presents a strategic model of risk-taking behavior in contests. Formally, we analyze an n-player winner-take-all contest in which each player decides when to stop a privately observed Brownian motion with drift. A player whose process reaches zero has to stop. The player with the highest stopping point wins. Unlike the explicit cost for a higher stopping time in a war of attrition, here, higher stopping times are riskier, because players can go bankrupt. We derive a closed-form solution of a Nash equilibrium outcome. In equilibrium, highest expected losses occur at an intermediate negative value of the drift.

Technical Details

RePEc Handle
repec:eee:jetheo:v:148:y:2013:i:5:p:2033-2048
Journal Field
Theory
Author Count
2
Added to Database
2026-01-29