We analyze how agents' effort choice in multi-agent rank-order tournaments depend on the probability distribution of the random production shock and on the agents' risk-aversion. If the shock is non-uniform, equilibrium effort depends on the number of winners and losers in the tournament. It is...

This paper presents evidence on the role of the endowment effect in shaping the risk-taking behavior of entrepreneurs, and how the potential of losing their firms lead them to take higher risks. This study uses an experimental design with 466 entrepreneurs in Cali, Colombia. Results show that...

Risk and risk aversion are important concepts when modeling how to choose from or rank a set of random variables. This chapter reviews and summarizes the definitions and related findings concerning risk aversion and risk in both a mean-variance and an expected utility decision model context.