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Bidding in hierarchies

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  • Konrad, Kai A.

Abstract

This paper reconsiders the comparison between hierarchical contests and single-stage contests. A condition is given that characterizes whether and when the aggregate equilibrium payoff of contestants is higher in the single-stage contest, and when the single-stage contest is more likely to award the prize to the contestant who values it most highly. The outcome depends on inter- and intra-group heterogeneity, and is not driven by free-rider incentives. -- Diese Arbeit untersucht das Bietverhalten in einstufigen Turnieren und in sogenannten hierarchischen Turnieren, in denen zunächst Gruppen um einen Preis konkurrieren und anschließend die Mitglieder der siegreichen Gruppe um den Preis konkurrieren. Im Gegensatz zu existierenden Ergebnissen, wonach der Gesamtturnieraufwand in einstufigen Turnieren höher ist als in hierarchischen Turnieren, ergibt sich bei heterogenen Bietern eine Bedingung, die beschreibt, ob und wann die aggregierten gleichgewichtigen Aufwendungen der Turnierteilnehmer im nicht-hierarchischen Wettkampf größer sind und wann ein nicht-hierarchischer Wettkampf den zu gewinnenden Preis mit höherer Wahrscheinlichkeit an einen Wettkämpfer vergibt, der den Preis besonders hoch schätzt. Für das Zustandekommen der Ergebnisse ist nicht das Trittbrettfahrerverhalten von Gruppenmitgliedern, sondern die Heterogenität innerhalb der Gruppen im Verhältnis zur Heterogenität innerhalb der Gruppen von besonderer Bedeutung.

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Bibliographic Info

Paper provided by Social Science Research Center Berlin (WZB) in its series Discussion Papers, Research Unit: Market Processes and Governance with number SP II 2003-27.

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Date of creation: 2003
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Handle: RePEc:zbw:wzbmpg:spii200327

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Related research

Keywords: Contest; hierarchies; rent dissipation;

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References

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  1. Yeon-Koo Che & Ian Gale, 1998. "Caps on Political Lobbying," Microeconomics 9809003, EconWPA.
  2. Baye, M. & Kovenock, D. & Vries, C. de, 1990. "The All-Pay Auction with Complete Information," Discussion Paper 1990-51, Tilburg University, Center for Economic Research.
  3. Konrad, Kai A., 2001. "Investment in the absence of property rights: the role of incumbency advantages," Discussion Papers, Research Unit: Market Processes and Governance FS IV 01-18, Social Science Research Center Berlin (WZB).
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  6. Stergios Skaperdas, 2003. "Restraining the Genuine Homo Economicus: Why the Economy Cannot be Divorced from its Governance," CESifo Working Paper Series 901, CESifo Group Munich.
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  8. Stergios Skaperdas, 1996. "Contest success functions (*)," Economic Theory, Springer, vol. 7(2), pages 283-290.
  9. Warneryd, Karl, 1998. "Distributional conflict and jurisdictional organization," Journal of Public Economics, Elsevier, vol. 69(3), pages 435-450, September.
  10. Nitzan, Shmuel, 1991. "Collective Rent Dissipation," Economic Journal, Royal Economic Society, vol. 101(409), pages 1522-34, November.
  11. Baik, Kyung Hwan & Kim, In-Gyu & Na, Sunghyun, 2001. "Bidding for a group-specific public-good prize," Journal of Public Economics, Elsevier, vol. 82(3), pages 415-429, December.
  12. Davis, Douglas D & Reilly, Robert J, 1999. " Rent-Seeking with Non-identical Sharing Rules: An Equilibrium Rescued," Public Choice, Springer, vol. 100(1-2), pages 31-38, July.
  13. Muller, Holger M & Warneryd, Karl, 2001. "Inside versus Outside Ownership: A Political Theory of the Firm," RAND Journal of Economics, The RAND Corporation, vol. 32(3), pages 527-41, Autumn.
  14. Ellingsen, T., 1990. "Strategic Buyers and the Social Cost of Monopoly," Papers 05-90, Norwegian School of Economics and Business Administration-.
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