Bidding in Hierarchies
Kai A. Konrad
Max Planck Institute for Tax Law and Public Finance; Social Science Research Center Berlin (WZB); Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute for Economic Research); Institute for the Study of Labor (IZA)
WZB, Markets and Political Economy Working Paper No. SP II 2003-27
This paper reconsiders the comparison between hierarchical contests and single-stage contests. A condition is given that characterizes whether and when the aggregate equilibrium payoff of contestants is higher in the single-stage contest, and when the single-stage contest is more likely to award the prize to the contestant who values it most highly. The outcome depends on inter- and intra-group heterogeneity, and is not driven by free-rider incentives.
Number of Pages in PDF File: 12
Keywords: Contest, hierarchies, rent dissipation
JEL Classification: D72, D74working papers series
Date posted: February 21, 2004
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