Alliances and Technological Partnerships in Contests

This paper analyses the formation of alliances and technological partnerships in contests. Alliances enhance the probability of winning at the cost of sharing the prize if won, while technological partnerships reduce the marginal cost of the effort invested in the contest by the members. When agents cannot form technological partnerships, I find that no alliance can be stable. When agents exhibit extreme free ridding behaviour at equilibrium, the stabilisation of the grand alliance by technological cooperation requires restrictive assumptions on the set of blocking agents. Nevertheless, When the agents manifest less free ridding intentions, the threat of being excluded from a global technological partnership is sufficient to ensure the stability of the grand alliance in the long run. This indicates that when the free ridding behaviours are not extreme, the ability to exclude is a sufficient condition for the global technological cooperation to annihilate competition in contests. In that context, the existence of technological partnerships facilitates the formation of alliances.