Expectation-based loss aversion and rank-order tournaments

Many insights regarding rank-order tournaments rest upon contestants' behavior in symmetric equilibria. As shown by Gill and Stone (Games Econ Behav 69:346-364, 2010), however, symmetric equilibria may not exist if contestants are expectation-based loss averse and have choice-acclimating expectations. We show that under choice-unacclimatingi.e., fixedexpectations both symmetric and asymmetric equilibria exist for all degrees of loss aversion. Importantly, a symmetric equilibrium also exists if players follow their preferred credible plan and the weight attached to psychological gain-loss utility does not strongly outweigh the weight put on material utility. Hence, for fixed expectations a focus on symmetric equilibria seems justifiable even if contestants are expectation-based loss averse.