Aggression is ubiquitous in the animal kingdom, whenever the interests of individuals conflict. In contests between animals, the larger opponent is often victorious. However, counter intuitively, an individual that has little chance of winning (generally smaller individuals) sometimes initiates contests. A number of hypotheses have been put forward to explain this behaviour, including the 'desperado effect' according to which, the likely losers initiate aggression due to lack of alternative options. An alternative explanation suggested recently is that likely losers attack due to an error in perception: they mistakenly perceive their chances of winning as being greater than they are. We show that explaining the apparently maladaptive aggression initiated by the likely loser can be explained on purely economic grounds, without requiring either the desperado effect or perception errors. Using a game-theoretical model, we show that if smaller individuals can accurately assess their chance of winning, if this chance is less than, but close to, a half, and if resources are scarce (or the contested resource is of relatively low value), they are predicted to be as aggressive as their larger opponents. In addition, when resources are abundant, and small individuals have some chance of winning, they may be more aggressive than their larger opponents, as it may benefit larger individuals to avoid the costs of fighting and seek alternative uncontested resources.