Bidding in Hierarchies
WZB, Markets and Political Economy Working Paper No. SP II 2003-27
12 Pages Posted: 21 Feb 2004
Date Written: December 2003
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.
Keywords: Contest, hierarchies, rent dissipation
JEL Classification: D72, D74
Suggested Citation: Suggested Citation