Optimal Allocation of Heterogeneous Agents in Contests
In this paper, we discuss a manager's allocation problem. Two managers allocate their heterogeneous employees - each manager allocates two high types and two low types - in groups of two in order to compete for an exogenous contest prize in a two period model. There are three possibilities of groups' constellation depending on manager's allocation decision: Strong groups (two high types), balanced groups (one high and one low type) and weak groups (two low types). These allocations determine the managers’ performance. We show that equilibria in a simultaneous as well as in a sequential game only depend on the difference of the heterogeneous groups' outputs. Furthermore, we show that there is no second mover advantage according this model. Therefore, firms' performances are independent of the model's timing. A typical application of the model fits to coaches’ decisions in ice hockey concerning the optimal constellation of the first, second, third (and so forth) lines.
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- Lazear, Edward P & Rosen, Sherwin, 1981.
"Rank-Order Tournaments as Optimum Labor Contracts,"
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- Glenn C. Loury, 1979. "Market Structure and Innovation," The Quarterly Journal of Economics, Oxford University Press, vol. 93(3), pages 395-410.
- Glenn C. Loury, 1976. "Market Structure and Innovation," Discussion Papers 256, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Jack Hirshleifer, 1989. "Conflict and rent-seeking success functions: Ratio vs. difference models of relative success," Public Choice, Springer, vol. 63(2), pages 101-112, November. Full references (including those not matched with items on IDEAS)
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