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First In Village Or Second In Rome?

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  • Ettore Damiano
  • Hao Li
  • Wing Suen

Abstract

Though individuals prefer high-quality peers, there are advantages to being high up in the pecking order within a group. In this environment, sorting of agents yields an overlapping interval structure in the type space. Segregation and mixing coexist in a stable equilibrium. With transfers, this equilibrium corresponds to a competitive equilibrium where agents bid for relative positions and entails less segregation than the efficient allocation. More egalitarianism within organizations induces greater segregation across organizations, but can improve the allocation efficiency. Since competition is most intense for intermediate talent, effective personnel policies differ systematically between high-quality and low-quality organizations. Copyright (2010) by the Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Suggested Citation

  • Ettore Damiano & Hao Li & Wing Suen, 2010. "First In Village Or Second In Rome?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 51(1), pages 263-288, February.
    • Handle: RePEc:ier:iecrev:v:51:y:2010:i:1:p:263-288
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    References listed on IDEAS

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    Cited by:

    1. Damiano, Ettore & Li, Hao & Suen, Wing, 2012. "Competing for talents," Journal of Economic Theory, Elsevier, vol. 147(6), pages 2190-2219.
    2. Tobias Hiller, 2022. "Abilities and the structure of the firm," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 69(3), pages 339-349, September.
    3. Barberà, Salvador & Beviá, Carmen & Ponsatí, Clara, 2015. "Meritocracy, egalitarianism and the stability of majoritarian organizations," Games and Economic Behavior, Elsevier, vol. 91(C), pages 237-257.
    4. Fernanda Estevan & Thomas Gall; Patrick Legros; Andrew F. Newman, 2014. "College Admission and High School Integration," Working Papers, Department of Economics 2014_26, University of São Paulo (FEA-USP).
    5. Tim Ehlers & Robert Schwager, 2019. "Academic Achievement and Tracking - A Theory Based on Grading Standards," CESifo Working Paper Series 7866, CESifo.
    6. Chade, Hector & Eeckhout, Jan, 2018. "Matching information," Theoretical Economics, Econometric Society, vol. 13(1), January.
    7. Linnemer, Laurent & Visser, Michael, 2016. "Self-selection in tournaments: The case of chess players," Journal of Economic Behavior & Organization, Elsevier, vol. 126(PA), pages 213-234.
    8. Ghazala Azmat & Marc Möller, 2018. "The Distribution of Talent Across Contests," Economic Journal, Royal Economic Society, vol. 128(609), pages 471-509, March.
    9. Newman, Andrew & Gall, Thomas & Estevan, Fernanda, 2017. "The Top-Ten Way to Integrate High Schools," CEPR Discussion Papers 11910, C.E.P.R. Discussion Papers.
    10. Alison Watts, 2007. "Formation of segregated and integrated groups," International Journal of Game Theory, Springer;Game Theory Society, vol. 35(4), pages 505-519, April.
    11. Jens Prüfer & Uwe Walz, 2013. "Academic faculty governance and recruitment decisions," Public Choice, Springer, vol. 155(3), pages 507-529, June.
    12. Craig Andrea & Vierø Marie-Louise, 2013. "Academia or the Private Sector? Sorting of Agents into Institutions and an Outside Sector," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 13(1), pages 303-345, December.
    13. Ghazala Azmat & Marc Möller, 2016. "The Distribution of Talent across Contests Feedback in Higher Education," Working Papers 789, Queen Mary University of London, School of Economics and Finance.
    14. John Morgan & Dana Sisak & Felix Várdy, 2018. "The Ponds Dilemma," Economic Journal, Royal Economic Society, vol. 128(611), pages 1634-1682, June.
    15. Morelli, Massimo & Park, In-Uck, 2016. "Internal hierarchy and stable coalition structures," Games and Economic Behavior, Elsevier, vol. 96(C), pages 90-96.
    16. Khalil, Elias L. & Aimone, Jason A. & Houser, Daniel & Wang, Siyu & Martinez, Deborah & Qian, Kun, 2021. "The aspirational income hypothesis: On the limits of the relative income hypothesis," Journal of Economic Behavior & Organization, Elsevier, vol. 182(C), pages 229-247.
    17. Tobias Hiller, 2023. "Training, Abilities and the Structure of Teams," Games, MDPI, vol. 14(3), pages 1-8, May.
    18. Jambo, Siti Azmah & Abdulla, Rahmath & Mohd Azhar, Siti Hajar & Marbawi, Hartinie & Gansau, Jualang Azlan & Ravindra, Pogaku, 2016. "A review on third generation bioethanol feedstock," Renewable and Sustainable Energy Reviews, Elsevier, vol. 65(C), pages 756-769.
    19. Alison Watts, 2006. "Formation of Segregated and Integrated Groups," Working Papers 2006.127, Fondazione Eni Enrico Mattei.

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    More about this item

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • M50 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - General

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