This thesis deals with the effects of loss aversion and talent on the outcome of a two player Tullock contest. It will be proven that a player's winning probability is increasing (decreasing) in the own (opponent's) skill level and decreasing (increasing) in the own (opponent's) degree of loss aversion. Further, it will be shown that winning probabilities are independent of the prize and that an untalented rather loss neutral player may have a higher probability of winning the contest than a highly skilled but very loss averse contestant. Also it will be demonstrated that the presence of loss aversion and difference in skill levels will significantly reduce the proportion of the rent dissipated throughout the contest. The results are compared with the results of a paper of Sahm (2010) which examines a Tullock contest that employs risk aversion instead of loss aversion. A number of graphical simulations of the model will support the assertions made in the thesis.     «

This thesis deals with the effects of loss aversion and talent on the outcome of a two player Tullock contest. It will be proven that a player's winning probability is increasing (decreasing) in the own (opponent's) skill level and decreasing (increasing) in the own (opponent's) degree of loss aversion. Further, it will be shown that winning probabilities are independent of the prize and that an untalented rather loss neutral player may have a higher probability of winning the contest than a hig...     »