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Competition over More Than One Prize

In: 40 Years of Research on Rent Seeking 1

Author

Listed:
  • Derek J. Clark

    (NFH, University of Tromsø)

  • Christian Rus

    (Foundation for Research in Economics and Business Administration (SNF))

Abstract

In many situations, competition may be used as a means for providing incentives. Suppose that a firm is restricted to pay the same wage to all workers who have the same job (as is broadly the case for lecturers at Norwegian universities, for example). This situation may arise due to a union-imposed restriction, or it may be voluntary. In order to provide an incentive to make the workers exert extra effort without breaking the uniform wage restriction, the firm may instigate a contest among workers with in-kind prizes such as paid leave, a family holiday, or promotion. Those who exert the most effort may, on the basis of past experience for example, expect to win the prizes, but losers cannot have their effort refunded; that “bids” are sunk makes the allpay auction a theoretical construct which can be used to model this situation.

Suggested Citation

  • Derek J. Clark & Christian Rus, 2008. "Competition over More Than One Prize," Springer Books, in: Roger D. Congleton & Arye L. Hillman & Kai A. Konrad (ed.), 40 Years of Research on Rent Seeking 1, pages 601-614, Springer.
    • Handle: RePEc:spr:sprchp:978-3-540-79182-9_44
    DOI: 10.1007/978-3-540-79182-9_44
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