Search Duplication in Research and Design Spaces - Exploring the Role of Local Competition

19 Pages Posted: 17 Oct 2014 Last revised: 17 Dec 2014

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); IZA Institute of Labor Economics

Date Written: October 17, 2014

Abstract

Clustering and lack of sufficient diversification in research strategies has been identified as an important problem for delegated research as it takes place in design contests by Erat and Krishnan (2012). We show that this problem can be solved by local competition (such as bribery, lobbying or rent seeking) among players who apply the same search strategies or develop the same design. Such competition can restore full efficiency in the non-cooperative equilibrium. Local competition interacts with the choice of whether to cluster or to diversify, and rather than adding a further inefficiency to the existing ones, it eliminates inefficiency. The results are robust and hold under simultaneous search strategy choices as well as for sequential choices.

Keywords: O32, O33, D72, D74

JEL Classification: Delegated research, clustering, product design, design contest, search strat- egy, rent-seeking

Suggested Citation

Konrad, Kai A., Search Duplication in Research and Design Spaces - Exploring the Role of Local Competition (October 17, 2014). Working Paper of the Max Planck Institute for Tax Law and Public Finance No. 2014 - 19. Available at SSRN: https://ssrn.com/abstract=2511230 or http://dx.doi.org/10.2139/ssrn.2511230

Kai A. Konrad (Contact Author)

Max Planck Institute for Tax Law and Public Finance ( email )

Marstallplatz 1
Munich, 80539
Germany

HOME PAGE: http://www.tax.mpg.de/en/pub/home.cfm

Social Science Research Center Berlin (WZB) ( email )

Reichpietschufer 50
Berlin, 10785
Germany

HOME PAGE: http://www.wzb.eu/mp/fff/people/kai_konrad.en.htm

Centre for Economic Policy Research (CEPR)

90-98 Goswell Road
London, EC1V 7RR
United Kingdom

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

Poschinger Str. 5
Munich, 81679
Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, 53072
Germany

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