@techreport{NBERw15136,
 title = "Investment Tournaments: When Should a Rational Agent Put All Eggs in One Basket?",
 author = "Michael Schwarz and Sergei Severinov",
 institution = "National Bureau of Economic Research",
 type = "Working Paper",
 series = "Working Paper Series",
 number = "15136",
 year = "2009",
 month = "July",
 URL = "http://www.nber.org/papers/w15136",
 abstract = {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.},
}