Risk Aversion, Heterogeneity and Contests
We introduce a novel method of modelling contests that avoids the complexities encountered by the 'best response function' approach. We analyse contests in which (i) there are many risk averse players, (ii) attitudes to risk may differ across individuals, and (iii) the technology that transforms rent-seeking effort into probability of winning may also differ across individuals. We establish that, if every player has a constant degree of absolute risk aversion, a unique equilibrium exists. We...[Show more]
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