Inefficiency as a Strategic Device in Group Contests Against Dominant Opponents

13 Pages Posted: 24 Aug 2013

See all articles by Martin Kolmar

Martin Kolmar

University of St. Gallen - Institute of Economy and the Environment (IWOe-HSG); CESifo (Center for Economic Studies and Ifo Institute)

Andreas Wagener

Leibniz Universität Hannover - Economics and Business Administration Area; CESifo (Center for Economic Studies and Ifo Institute for Economic Research); Vienna University of Economics and Business Administration

Date Written: October 2013

Abstract

Contests between groups are prone to intra‐group externalities (free‐riding). Yet, costless incentive schemes that entirely avoid free‐riding within a group might be undesirable, both individually and socially. In contests between two groups, a relatively weak (i.e., small or unproductive) group will optimally not implement them because they compound differences in strength between groups. If the groups are of relatively similar strengths, they are both worse off when they rein in their intra‐group externalities compared to a situation where they do not. If groups' strengths differ sufficiently, the relatively strong group benefits at the expense of the relatively weak one.

JEL Classification: Z13, D72, N40, D74

Suggested Citation

Kolmar, Martin and Wagener, Andreas, Inefficiency as a Strategic Device in Group Contests Against Dominant Opponents (October 2013). Economic Inquiry, Vol. 51, Issue 4, pp. 2083-2095, 2013, Available at SSRN: https://ssrn.com/abstract=2315406 or http://dx.doi.org/10.1111/ecin.12012

Martin Kolmar (Contact Author)

University of St. Gallen - Institute of Economy and the Environment (IWOe-HSG) ( email )

Varnbüelstrasse 14
CH-9000 St. Gallen
Switzerland
+41 (0)71 224 25 35 (Phone)
+41 (0)71 224 23 02 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Andreas Wagener

Leibniz Universität Hannover - Economics and Business Administration Area ( email )

Koenigsworther Platz 1
30167 Hannover
Germany

CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

Vienna University of Economics and Business Administration ( email )

Welthandelsplatz 1
Vienna, Wien 1020
Austria

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