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Reimbursement in contests with bilateral delegation

Author

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  • Baik, Kyung Hwan
  • Min, Daehong

Abstract

We study two-player contests in which each player first hires a delegate to expend effort on her behalf, and then the delegates choose their effort levels simultaneously. The losing player pays the winning player reimbursement for part of the effort (cost) that the winning delegate expended. We find that each player offers her delegate greater compensation (in the case of winning) in the model with reimbursement than in the model without reimbursement. The equilibrium expected payoffs for the delegates [players] are greater [smaller] in the model with reimbursement than in the model without reimbursement. As the reimbursement rate increases, each player offers her delegate greater compensation (in the case of winning), economic rent for each delegate increases, and each player is worse off.

Suggested Citation

  • Baik, Kyung Hwan & Min, Daehong, 2025. "Reimbursement in contests with bilateral delegation," Economics Letters, Elsevier, vol. 253(C).
    • Handle: RePEc:eee:ecolet:v:253:y:2025:i:c:s0165176525002083
    DOI: 10.1016/j.econlet.2025.112371
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    References listed on IDEAS

    as
    1. Sung-Hoon Park & Chad E. Settle, 2023. "Asymmetric Reimbursement and Contingent Fees in Environmental Conflicts: Observable vs. Unobservable Contracts," Games, MDPI, vol. 14(4), pages 1-10, July.
    2. Kyung Hwan Baik, 2007. "Equilibrium Contingent Compensation in Contests with Delegation," Southern Economic Journal, John Wiley & Sons, vol. 73(4), pages 986-1002, April.
    3. Kyung Hwan Baik & Jong Hwa Lee, 2013. "Endogenous Timing In Contests With Delegation," Economic Inquiry, Western Economic Association International, vol. 51(4), pages 2044-2055, October.
    4. Baik, Kyung Hwan & Kim, In-Gyu, 1997. "Delegation in contests," European Journal of Political Economy, Elsevier, vol. 13(2), pages 281-298, May.
    5. Lambert Schoonbeek, 2007. "Delegation with multiple instruments in a rent-seeking contest," Public Choice, Springer, vol. 131(3), pages 453-464, June.
    6. Byung In Lim & Jason Shogren, 2004. "Unilateral delegation and reimbursement systems in an environmental conflict," Applied Economics Letters, Taylor & Francis Journals, vol. 11(8), pages 489-493.
    7. Schoonbeek, Lambert, 2004. "Delegation in a group-contest," European Journal of Political Economy, Elsevier, vol. 20(1), pages 263-272, March.
    8. Kyung Hwan Baik, 2007. "Equilibrium Contingent Compensation in Contests with Delegation," Southern Economic Journal, Southern Economic Association, vol. 73(4), pages 986-1002, April.
    9. Baik Kyung Hwan & Shogren Jason F., 1994. "Environmental Conflicts with Reimbursement for Citizen Suits," Journal of Environmental Economics and Management, Elsevier, vol. 27(1), pages 1-20, July.
    10. Lambert Schoonbeek, 2002. "A delegated agent in a winner-takes-all contest," Applied Economics Letters, Taylor & Francis Journals, vol. 9(1), pages 21-23.
    11. Cohen, Chen & Sela, Aner, 2005. "Manipulations in contests," Economics Letters, Elsevier, vol. 86(1), pages 135-139, January.
    12. Pan Sang Kang, 2024. "Endogenous Information Disclosure in Contests with Delegation," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 180(4), pages 577-596.
    13. Alexander Matros & Daniel Armanios, 2009. "Tullock’s contest with reimbursements," Public Choice, Springer, vol. 141(1), pages 49-63, October.
    14. Warneryd, Karl, 2000. "In Defense of Lawyers: Moral Hazard as an Aid to Cooperation," Games and Economic Behavior, Elsevier, vol. 33(1), pages 145-158, October.
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    Keywords

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    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process

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