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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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    More about this item

    Keywords

    Contest; Litigation; Delegation; Reimbursement; Contingent compensation; Contingent fee;
    All these keywords.

    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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