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Outsourcing in contests

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  • Frode Meland
  • Odd Straume

Abstract

We study ex post outsourcing of production in an imperfectly discriminating contest, interpreted here as a research tournament or a procurement contest for being awarded some production contract. We find that the possibility of outsourcing increases competition between the contestants, leading to higher total contest effort, if the contest winner is expected to obtain a sufficiently large share of ex post outsourcing rents. Under reasonable assumptions, outsourcing tends also to increase the number of active contestants, strengthening the case for outsourcing to increase total contest effort. If such effort is socially wasteful, outsourcing creates a welfare trade-off between ex ante and ex post efficiency. Copyright Springer Science+Business Media, LLC 2007

Suggested Citation

  • Frode Meland & Odd Straume, 2007. "Outsourcing in contests," Public Choice, Springer, vol. 131(3), pages 315-331, June.
    • Handle: RePEc:kap:pubcho:v:131:y:2007:i:3:p:315-331
    DOI: 10.1007/s11127-006-9117-x
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    Cited by:

    1. Khaled Bennour, 2009. "The value of rents and the likelihood of conflicts," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 56(2), pages 163-173, June.
    2. De Frutos, María Ángeles & Espinosa Alejos, María Paz, 2012. "Resale in Auctions with Financial Constraints," DFAEII Working Papers 1988-088X, University of the Basque Country - Department of Foundations of Economic Analysis II.
    3. Heijdra, Ben J. & Ligthart, Jenny E., 2010. "The Transitional Dynamics Of Fiscal Policy In Small Open Economies," Macroeconomic Dynamics, Cambridge University Press, vol. 14(1), pages 1-28, February.
    4. repec:dau:papers:123456789/179 is not listed on IDEAS
    5. Bos, Olivier, 2011. "How lotteries outperform auctions," Economics Letters, Elsevier, vol. 110(3), pages 262-264, March.

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    More about this item

    Keywords

    Contests; Non-price competition; Outsourcing;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures

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