Endogenous Timing in Contests with Delegation

12 Pages Posted: 24 Aug 2013

See all articles by Kyung Hwan Baik

Kyung Hwan Baik

Sungkyunkwan University

Jong Hwa Lee

Sungkyunkwan University - Department of Economics

Date Written: October 2013

Abstract

We study two‐player contests in which each player hires a delegate, and the delegates decide endogenously when to expend their effort. First, we look closely at the delegates' decisions on when to expend their effort, given contracts between the players and the delegates, and look at the players' decisions on their contracts. Then, we compare the outcomes of the endogenous‐timing framework with those of the simultaneous‐move framework. We show that the higher‐valuation player offers her delegate greater contingent compensation than her opponent, the delegate of the higher‐valuation player chooses his effort level after observing his counterpart's, the equilibrium expected payoff of the delegate of the higher‐valuation player is greater than that of his counterpart, and economic rent for each delegate exists. We show that, in the endogenous‐timing framework, each player offers her delegate better contingent compensation, each delegate's expected payoff is greater, and each player's expected payoff is smaller, as compared with the simultaneous‐move framework.

JEL Classification: D72

Suggested Citation

Baik, Kyung Hwan and Lee, Jong Hwa, Endogenous Timing in Contests with Delegation (October 2013). Economic Inquiry, Vol. 51, Issue 4, pp. 2044-2055, 2013. Available at SSRN: https://ssrn.com/abstract=2315428 or http://dx.doi.org/10.1111/j.1465-7295.2012.00487.x

Kyung Hwan Baik (Contact Author)

Sungkyunkwan University ( email )

Department of Economics
Seoul, 110-745
Korea, Republic of (South Korea)
+82-2-760-0432 (Phone)
+82-2-744-5717 (Fax)

Jong Hwa Lee

Sungkyunkwan University - Department of Economics ( email )

110-745 Seoul
Korea

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