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Categorical Redistribution in Winner-Take-All Markets

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  • Roland G. Fryer
  • Glenn C. Loury

Abstract

This paper constructs a simple model of pair-wise tournament competition to investigate categorical redistribution in winner-take-all markets. We consider two forms of redistribution: category-sighted, where employers are allowed to use categorical information in pursuit of their redistributive goals; and category-blind, where they are not. It is shown that the equilibrium category-sighted redistribution scheme involves a constant handicap given to agents in the disadvantaged category. Equilibrium category-blind redistribution creates a unique semi-separating equilibrium in which a large pool of contestants exerts zero effort, and this pool is increasing in the aggressiveness of the redistribution goal.

Suggested Citation

  • Roland G. Fryer & Glenn C. Loury, 2003. "Categorical Redistribution in Winner-Take-All Markets," NBER Working Papers 10104, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:10104
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    File URL: http://www.nber.org/papers/w10104.pdf
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    References listed on IDEAS

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    1. Lazear, Edward P & Rosen, Sherwin, 1981. "Rank-Order Tournaments as Optimum Labor Contracts," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 841-864, October.
    2. Roger B. Myerson, 1978. "Optimal Auction Design," Discussion Papers 362, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    3. Bulow, Jeremy & Roberts, John, 1989. "The Simple Economics of Optimal Auctions," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1060-1090, October.
    4. Rosen, Sherwin, 1986. "Prizes and Incentives in Elimination Tournaments," American Economic Review, American Economic Association, vol. 76(4), pages 701-715, September.
    5. Green, Jerry R & Stokey, Nancy L, 1983. "A Comparison of Tournaments and Contracts," Journal of Political Economy, University of Chicago Press, vol. 91(3), pages 349-364, June.
    6. In-Koo Cho & David M. Kreps, 1987. "Signaling Games and Stable Equilibria," The Quarterly Journal of Economics, Oxford University Press, vol. 102(2), pages 179-221.
    7. J. A. Mirrlees, 1971. "An Exploration in the Theory of Optimum Income Taxation," Review of Economic Studies, Oxford University Press, vol. 38(2), pages 175-208.
    8. Riley, John G, 1979. "Informational Equilibrium," Econometrica, Econometric Society, vol. 47(2), pages 331-359, March.
    9. Roger B. Myerson, 1981. "Optimal Auction Design," Mathematics of Operations Research, INFORMS, vol. 6(1), pages 58-73, February.
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    Citations

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    Cited by:

    1. Roland Fryer & Glenn Loury, 2005. "Affirmative action in winner-take-all markets," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 3(3), pages 263-280, December.
    2. Roland Fryer & Glenn C. Loury & Tolga Yuret, 2003. "Color-Blind Affirmative Action," NBER Working Papers 10103, National Bureau of Economic Research, Inc.
    3. Roland G. Fryer Jr. & Glenn C. Loury, 2005. "Affirmative Action and Its Mythology," Journal of Economic Perspectives, American Economic Association, vol. 19(3), pages 147-162, Summer.

    More about this item

    JEL classification:

    • D3 - Microeconomics - - Distribution
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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