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Profit sharing with a contest among agents

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  • Chong Wang
  • Mingli Zheng

Abstract

We consider how an internal competition in the form of a contest among agents can be combined with profit sharing in team production. The principal can choose to share between the principal and the agents as well as the sharing rule with a competitive contest among the agents. We show that under some conditions, a pure strategy equilibrium of profit sharing exists. In equilibrium, internal sharing involves a contest that is more competitive than proportional sharing, and the principal can get higher profit compared to proportional sharing.

Suggested Citation

  • Chong Wang & Mingli Zheng, 2023. "Profit sharing with a contest among agents," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(1), pages 244-250, January.
    • Handle: RePEc:wly:mgtdec:v:44:y:2023:i:1:p:244-250
    DOI: 10.1002/mde.3677
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    References listed on IDEAS

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