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On Delegation in Contests and the Survival of Payoff Maximizing Behavior

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  • Possajennikov Alex

    (University of Nottingham, alex.possajennikov@nottingham.ac.uk)

Abstract

In two-player contests, optimal delegation involves giving the agent incentives to maximize the principal's payoff while in contests with more than two players incentives will be different from the principal's payoff maximization. These results are related to the evolutionary stability of payoff-maximizing preferences in the model of indirect evolution in general symmetric games, which depends on the slope of the reaction function being zero at equilibrium. Further examples of the relationship are also discussed.

Suggested Citation

  • Possajennikov Alex, 2010. "On Delegation in Contests and the Survival of Payoff Maximizing Behavior," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 10(1), pages 1-13, June.
    • Handle: RePEc:bpj:bejtec:v:10:y:2010:i:1:n:25
    DOI: 10.2202/1935-1704.1629
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    References listed on IDEAS

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    1. Fershtman, Chaim & Judd, Kenneth L, 1987. "Equilibrium Incentives in Oligopoly," American Economic Review, American Economic Association, vol. 77(5), pages 927-940, December.
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    3. Fershtman, Chaim & Judd, Kenneth L & Kalai, Ehud, 1991. "Observable Contracts: Strategic Delegation and Cooperation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 32(3), pages 551-559, August.
    4. Vickers, John, 1985. "Delegation and the Theory of the Firm," Economic Journal, Royal Economic Society, vol. 95(380a), pages 138-147, Supplemen.
    5. Krakel, Matthias & Sliwka, Dirk, 2006. "Strategic delegation and mergers in oligopolistic contests," Journal of Economics and Business, Elsevier, vol. 58(2), pages 119-136.
    6. Avinash Dixit, 2008. "Strategic Behavior in Contests," Springer Books, in: Roger D. Congleton & Arye L. Hillman & Kai A. Konrad (ed.), 40 Years of Research on Rent Seeking 1, pages 431-438, Springer.
    7. Alex Possajennikov, 2009. "Commitment in symmetric contests," Economics Bulletin, AccessEcon, vol. 29(1), pages 375-383.
    8. Aviad Heifetz & Chris Shannon & Yossi Spiegel, 2007. "The Dynamic Evolution of Preferences," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 32(2), pages 251-286, August.
    9. Dufwenberg, Martin & Guth, Werner, 1999. "Indirect evolution vs. strategic delegation: a comparison of two approaches to explaining economic institutions," European Journal of Political Economy, Elsevier, vol. 15(2), pages 281-295, June.
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    Cited by:

    1. Boudreau, James W. & Shunda, Nicholas, 2012. "On the evolution of prize perceptions in contests," Economics Letters, Elsevier, vol. 116(3), pages 498-501.

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