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Risk Aversion and Prudence in Contests
von Marco SahmI examine the impact of risk preferences on efforts and winning probabilities in generalised Tullock contests between two players. The theoretical analysis yields two main results. First, I specify a sufficient condition on the agents’ comparative prudence under which a higher common level of risk aversion leads to lower aggregate effort in symmetric contests. Sec-
ond, I show that for a certain range of parameters in asymmetric contests, higher risk-aversion will be a disadvantage if the agent is comparativelyprudent.