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Outsourcing in contests

  • Frode Meland
  • Odd Straume

    ()

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

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Article provided by Springer in its journal Public Choice.

Volume (Year): 131 (2007)
Issue (Month): 3 (June)
Pages: 315-331

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Handle: RePEc:kap:pubcho:v:131:y:2007:i:3:p:315-331
Contact details of provider: Web page: http://www.springerlink.com/link.asp?id=100332

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