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Outsourcing in Contests

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Author Info
Frode Meland ()
Odd Rune Straume ()

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Abstract

We study ex post outsourcing of production in an imperfectly discriminating contest, interpreted here as a research tournament or a procurement contest for being awarded some production contract. We find that the possibility of outsourcing increases competition between the contestants, leading to higher total contest effort, unless the ex-post bargaining strength of the contest winner is sufficiently low and/or there are very few contestants. However, even in the case of two contestants, outsourcing reduces the procurement costs of inducing a given level of effort if the contest organizer can collect entry fees. With respect to contest design, this suggests that outsourcing should generally be allowed if the objective is to induce stronger competition.

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Publisher Info
Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number CESifo Working Paper No. 1658.

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Date of creation: 2006
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Handle: RePEc:ces:ceswps:_1658

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Related research
Keywords: contests; outsourcing; bargaining; contest design;

Other versions of this item:

Find related papers by JEL classification:
D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures

This paper has been announced in the following NEP Reports:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Gale, Ian L & Hausch, Donald B & Stegeman, Mark, 2000. "Sequential Procurement with Subcontracting," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 41(4), pages 989-1020, November.
  2. Yossef Spiegel, 1993. "Horizontal Subcontracting," RAND Journal of Economics, The RAND Corporation, vol. 24(4), pages 570-590, Winter. [Downloadable!] (restricted)
  3. Morton I. Kamien & Lode Li & Dov Samet, 1989. "Bertrand Competition with Subcontracting," RAND Journal of Economics, The RAND Corporation, vol. 20(4), pages 553-567, Winter. [Downloadable!] (restricted)
  4. Stein, William E, 2002. " Asymmetric Rent-Seeking with More Than Two Contestants," Public Choice, Springer, vol. 113(3-4), pages 325-36, December. [Downloadable!] (restricted)
  5. Rogerson, William P, 1989. "Profit Regulation of Defense Contractors and Prizes for Innovation," Journal of Political Economy, University of Chicago Press, vol. 97(6), pages 1284-1305, December. [Downloadable!] (restricted)
  6. Richard L. Fullerton & R. Preston McAfee, 1999. "Auctioning Entry into Tournaments," Journal of Political Economy, University of Chicago Press, vol. 107(3), pages 573-605, June. [Downloadable!] (restricted)
  7. Amegashie, J Atsu, 2000. " Some Results on Rent-Seeking Contests with Shortlisting," Public Choice, Springer, vol. 105(3-4), pages 245-53, December. [Downloadable!] (restricted)
  8. Chen, Yongmin & Ishikawa, Jota & Yu, Zhihao, 2004. "Trade liberalization and strategic outsourcing," Journal of International Economics, Elsevier, vol. 63(2), pages 419-436, July. [Downloadable!] (restricted)
    Other versions:
  9. Konrad, Kai A., 2006. "Silent interests and all-pay auctions," International Journal of Industrial Organization, Elsevier, vol. 24(4), pages 701-713, July. [Downloadable!] (restricted)
    Other versions:
  10. Kjell Erik Lommerud & Frode Meland & Odd Rune Straume, 2005. "Can Deunionization Lead to International Outsourcing?," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
  11. Shy, Oz & Stenbacka, Rune, 2003. "Strategic outsourcing," Journal of Economic Behavior & Organization, Elsevier, vol. 50(2), pages 203-224, February. [Downloadable!] (restricted)
  12. Szymanski, Stefan & Valletti, Tommaso, 2004. "First and Second Prizes in Imperfectly Discriminating Contests," CEPR Discussion Papers 4484, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  13. Taylor, Curtis R, 1995. "Digging for Golden Carrots: An Analysis of Research Tournaments," American Economic Review, American Economic Association, vol. 85(4), pages 872-90, September. [Downloadable!] (restricted)
  14. Gradstein, Mark & Konrad, Kai A, 1999. "Orchestrating Rent Seeking Contests," Economic Journal, Royal Economic Society, vol. 109(458), pages 536-45, October. [Downloadable!] (restricted)
  15. Arye L. Hillman & John G. Riley, 1987. "Politically Contestable Rents and Transfers," UCLA Economics Working Papers 452, UCLA Department of Economics. [Downloadable!]
  16. Moldovanu, Benny & Sela, Aner, 2002. "Contest Architecture," Sonderforschungsbereich 504 Publications 02-06, Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim. [Downloadable!]
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  17. Alexander, Barbara J, 1997. " Mechanisms for Rent Transfers: Subcontracting among Military Aircraft Manufacturers," Public Choice, Springer, vol. 91(3-4), pages 251-69, June. [Downloadable!] (restricted)
  18. Baye, M.R. & Kovenock, D. & De Vries, C.G., 1992. "Rigging the Lobbying Process: An Application of the All- Pay Auction," Papers 9-92-2, Pennsylvania State - Department of Economics.
    Other versions:
  19. Baye, Michael R. & Hoppe, Heidrun C., 2003. "The strategic equivalence of rent-seeking, innovation, and patent-race games," Games and Economic Behavior, Elsevier, vol. 44(2), pages 217-226, August. [Downloadable!] (restricted)
  20. Konrad, Kai A., 2000. "Trade contests," Journal of International Economics, Elsevier, vol. 51(2), pages 317-334, August. [Downloadable!] (restricted)
  21. Buehler, Stefan & Haucap, Justus, 2006. "Strategic outsourcing revisited," Journal of Economic Behavior & Organization, Elsevier, vol. 61(3), pages 325-338, November. [Downloadable!] (restricted)
    Other versions:
  22. Amegashie, J Atsu, 1999. " The Design of Rent-Seeking Competitions: Committees, Preliminary and Final Contests," Public Choice, Springer, vol. 99(1-2), pages 63-76, April. [Downloadable!] (restricted)
  23. Yeon-Koo Che & Ian Gale, 2003. "Optimal Design of Research Contests," American Economic Review, American Economic Association, vol. 93(3), pages 646-671, June. [Downloadable!]
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  24. Meland, Frode, 2002. " Unions and Market Integration in Contests," Public Choice, Springer, vol. 112(3-4), pages 293-304, September. [Downloadable!] (restricted)
  25. Clark, Derek J. & Riis, Christian, 2000. "Allocation efficiency in a competitive bribery game," Journal of Economic Behavior & Organization, Elsevier, vol. 42(1), pages 109-124, May. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Bennour, Khaled, 2008. "The Value of Rents and the Likelihood of Conflicts," MPRA Paper 8379, University Library of Munich, Germany. [Downloadable!]
    Other versions:
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