arXiv Open Access 2024

The psychology of prizes: Loss aversion and optimal tournament rewards

Dmitry Ryvkin Qin Wu

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Abstrak

We study the optimal allocation of prizes in rank-order tournaments with loss averse agents. Prize sharing becomes increasingly optimal with loss aversion because more equitable prizes reduce the marginal psychological cost of anticipated losses. Furthermore, loss aversion can boost effort if prizes are sufficiently equitable, but otherwise effort declines with loss aversion. Overall, these results give credence to more equitable allocations of competitive rewards. A win-win scenario is where optimal prizes are equitable even under loss neutrality, in which case the principal benefits from agents' loss aversion.

Topik & Kata Kunci

econ.TH

Penulis (2)

Dmitry Ryvkin

Qin Wu

Format Sitasi

APA MLA BibTeX

Ryvkin, D., Wu, Q. (2024). The psychology of prizes: Loss aversion and optimal tournament rewards. https://arxiv.org/abs/2411.01068

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Informasi Jurnal

Tahun Terbit: 2024
Bahasa: en
Sumber Database: arXiv
Akses: Open Access ✓