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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.

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Bibliographic Info

Article provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.

Volume (Year): 51 (2010)
Issue (Month): 1 (02)
Pages: 263-288

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Handle: RePEc:ier:iecrev:v:51:y:2010:i:1:p:263-288

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Cited by:
  1. Alison Watts, 2007. "Formation of segregated and integrated groups," International Journal of Game Theory, Springer, vol. 35(4), pages 505-519, April.
  2. Prüfer, J. & Walz, U., 2009. "Academic Faculty Governance and Recruitment Decisions," Discussion Paper 2009-021, Tilburg University, Tilburg Law and Economic Center.
  3. Ghazala Azmat & Marc Möller, 2012. "The distribution of talent across contests," Economics Working Papers 1298, Department of Economics and Business, Universitat Pompeu Fabra, revised May 2013.
  4. Alison Watts, 2006. "Formation of Segregated and Integrated Groups," Working Papers 2006.127, Fondazione Eni Enrico Mattei.
  5. Andrea Craig & Marie-Louise Vierø, 2008. "Academia or the Private Sector? Sorting of Agents into Institutions and an Outside Sector," Working Papers 1198, Queen's University, Department of Economics.
  6. Ettore Damiano & Hao Li & Wing Suen, 2006. "Competing for Talents," Departmental Working Papers _177, Chinese University of Hong Kong, Department of Economics.
  7. Salvador Barberà & Carmen Beviá & Clara Ponsatí, 2014. "Meritocracy, Egalitarianism and the Stability of Majoritarian Organizations," Working Papers 737, Barcelona Graduate School of Economics.

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