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Reach for the Stars: A Strategic Bidding Game

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  • Pepall, Lynne M
  • Richards, Daniel J

Abstract

We examine two-sided competition in a duopoly market for differentiated products. Downstream, the two firms compete in prices. Upstream, they compete in bidding to hire talent input and there is one unique superstar. The outcome depends on the downstream effect of only one firm employing the superstar. When this intensifies downstream competition, both firms are worse off than they would be if no superstar talent were available. When the hiring of the superstar softens downstream competition, both firms benefit, but a "winner's curse" emerges in which the firm winning the superstar talent earns less profit than its rival. Copyright 2001 by The London School of Economics and Political Science

Suggested Citation

  • Pepall, Lynne M & Richards, Daniel J, 2001. "Reach for the Stars: A Strategic Bidding Game," Economica, London School of Economics and Political Science, vol. 68(272), pages 489-504, November.
  • Handle: RePEc:bla:econom:v:68:y:2001:i:272:p:489-504
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    1. repec:gam:jsusta:v:9:y:2017:i:5:p:734-:d:97388 is not listed on IDEAS
    2. repec:bla:randje:v:48:y:2017:i:4:p:906-926 is not listed on IDEAS
    3. Peter Groothuis & James Richard Hill & Timothy Perri, 2009. "The dilemma of choosing talent: Michael Jordans are hard to find," Applied Economics, Taylor & Francis Journals, vol. 41(25), pages 3193-3198.
    4. Roberto Burguet & József Sákovics, 2017. "Competitive foreclosure," RAND Journal of Economics, RAND Corporation, vol. 48(4), pages 906-926, December.

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