Risk Taking in Selection Contests
- Hans K. Hvide og Eirik G. Kristiansen
- Working Paper
We study selection contests in which the strategic variable is degree of risk rather than amount of effort. The selection efficiency of such contests 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. Uncertainty about own type is shown to have an ambiguous effect on selection efficiency. The results contribute to our understanding of such diverse phenomena as promotion processes in firms, selection of fund managers and research tournaments.
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ISSN 1502-8190 (online)