English, Article, Journal or magazine article edition: Investment Tournaments: When Should a Rational Agent Put All Eggs in One Basket? Michael Schwarz; Sergei Severinov

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Bookmark: http://trove.nla.gov.au/version/140436
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Investment Tournaments: When Should a Rational Agent Put All Eggs in One Basket?
Author
  • Michael Schwarz
  • Sergei Severinov
Physical Description
  • preprint
Notes
  • In this paper we study "investment tournaments," a class of decision problems that involve gradual allocation of investment among several alternatives whose values are subject to exogenous shocks. The decision-maker's payoff is determined by the final values of the alternatives. An important example of career tournaments motivating our research is the career choice problem, since a person choosing a career often starts by investing in learning several professions. We show that in a broad range of cases it is optimal for the decision-maker in each time period to allocate all resources to the most promising alternative. We also show that in tournaments for a promotion the agents would rationally put forth a higher effort in an early stage of the tournament in a bid to capture a larger share of employer's investment, such as mentoring.
  • RePEc:nbr:nberwo:15136
Language
  • English
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