Heterogeneity of Players and Aggregate Effort in Contests

We explore the systematic effects of variation in players' heterogeneity on aggregate effort in contests. We show that if costs of effort are convex, a mean‐preserving increase in the variation of players' abilities can lead to an increase or decrease in aggregate effort, both in contests of complete and incomplete information, depending on the curvature of the effort cost function. Specifically, if effort costs are not too steep, aggregate effort increases in ability variation, whereas if effort costs are sufficiently steep, aggregate effort decreases in ability variation.     

Optimal information exchange in contests

We study optimal exchange of private information in a two-player all-pay auction contest with independent private binary values. A benevolent information center who is informed about the players’ values facilitates the exchange of information by disclosing a signal publicly. The informativeness of the signal determines the monotonicity of the unique symmetric equilibrium and the players’ expected payoff. We characterize the upper bound of players’ expected payoff and the corresponding optimal signals utilizing such a relation between the informativeness and the payoff. When the players are ex ante sufficiently heterogeneous, the optimal signals work through an information-rent channel by inducing allocative efficient contests. When the players are ex ante sufficiently homogeneous, the optimal signals work through an unlevel-playing-field channel by inducing asymmetric contests. In order to guarantee efficient allocation, a regulator can punish any exchange of information when the players are sufficiently homogeneous and impose no restrictions when they are sufficiently heterogeneous.     

Otra Empanada en la Parilla: Examining the Role of Culture and Information Sharing in Chile and Australia

One of the biggest assets of a firm is its information base. Included in this information base is a knowledge of prior errors and failures. Extant research suggests that while the propensity to share “bad news” (i.e. a prior error) is dependent on the cost of sharing, the perceived value of that cost may be culturally dependent. One area of interest that has received substantial attention in the prior literature has been cross‐cultural differences in negative information sharing in general, as well as the particular context in which the individual's superior is either present or absent during the information‐sharing process. Our study examines the role of the two cultural values (individualism/collectivism and to a lesser extent power distance) in explaining national differences in information sharing. By focusing on a sample from Chile and Australia, we were able to remove the regional cultural dimension of face, which has been inherent in prior studies that used Greater China as the representative of a collectivist society. Results from our quasi experiment show that when a supervisor is present during information sharing, collectivist Chilean decision‐makers are more willing to share negative information with their colleagues than their counterpart and individualist Australian decision‐makers. Our results also show that when a supervisor is absent, both Australian and Chilean decision‐makers are willing to share more negative information but the increase in the Australian propensity is significantly greater than that of the Chileans.     

Endogenous Group Formation in Contests: Unobservable Sharing Rules

We study contests in which players compete by expending irreversible effort to win a prize, the prize is awarded to one of the players, the winner shares the prize with other players in his group, if any, and each group's sharing rule is unobservable to the other groups and the singletons, if any, when the players expend their effort. The number of groups, their sizes, and the number of singletons are exogenous in the first model, whereas they are endogenous in the second model. We show that group formation occurs if the number of players is four or smaller, but does not occur otherwise. We examine the effect of endogenous group formation on total effort level and the profitability of endogenous group formation. In each of the two models, comparing the outcomes of the case of unobservable sharing rules with those of the case of observable sharing rules, we show that the two cases yield quite different outcomes.     

Problem-solving effort and success in innovation contests: The role of national wealth and national culture

Innovation contests allow firms to harness specialized skills and services from globally dispersed participants for solutions to business problems. Such contests provide a rich setting for operations management (OM) scholars to explore problem solving in global labor markets as firms continue to unbundle their innovation value chains. In this study, we examine the implications of specific types of diversity in innovation contests on problem-solving effort and success. First, we conceptualize diversity among contestants in terms of national wealth (measured as gross domestic product per capita (GDPP) adjusted for purchasing power parity) and national culture (measured using the culture dimensions of performance orientation and uncertainty avoidance) and examine how such factors influence problem-solving effort. Next, we examine how differences between contestants and contest holders in terms of the above factors influence contest outcomes. Using data from a popular online innovation contest platform and country-level archival data, we find that contestants from countries with lower levels of GDPP are more likely to exert greater problem-solving effort compared to other contestants. With regard to national culture, we find that performance orientation and uncertainty avoidance have positive and negative effects, respectively, each of which weakens with increasing levels of GDPP. Finally, our analysis provides evidence of homophily effects indicating that contestants who share greater similarities with the contest holder in terms of national wealth and national culture are more likely to be successful in a contest. We discuss the implications of the study's findings for contest holders and platform owners who organize innovation contests, and for emerging research on innovation contests.     

BEHAVIOR IN GROUP CONTESTS: A REVIEW OF EXPERIMENTAL RESEARCH

Group contests are ubiquitous. Some examples include warfare between countries, competition between political parties, team‐incentives within firms, and rent‐seeking. In order to succeed, members of the same group have incentives to cooperate with each other by expending effort. However, since effort is costly, each member also has an incentive to abstain from expending any effort and instead free ride on the efforts of other members. Contest theory predicts that the intensity of competition between groups and the amount of free riding within groups depend on the group size, sharing rule, group impact function, contest success function, and heterogeneity of players. We review experimental studies testing these theoretical predictions. Most studies find significant over‐expenditure of effort relative to the theory and significant heterogeneity of behavior within and between groups. Also, most studies find support for the comparative statics predictions of the theory (with the exception of the “group size paradox”). Finally, studies show that there are effective mechanisms that can promote within‐group cooperation and conflict resolution mechanisms that can de‐escalate and potentially eliminate between‐group conflict.     

Two-stage contests with effort-dependent values of winning

We study two-stage all-pay contests in which synergy exists between the stages. The value of winning for each contestant is fixed in the first stage while it is effort-dependent in the second one. We assume that a player’s effort in the first stage either increases (positive synergy) or decreases (negative synergy) his value of winning in the second stage. The subgame perfect equilibrium of this contest is analyzed with either positive or negative synergy. We show, in particular, that whether the contestants are symmetric or asymmetric their expected payoffs may be higher under negative synergy than under positive synergy. Consequently, they prefer smaller values of winning (negative synergy) over higher ones (positive synergy).     

Contests over joint production on networks

We consider a network of heterogeneous agents where each edge represents a two‐player contest between the respective nodes. In these bilateral contests, agents compete over an endogenous prize jointly produced using their own contest efforts. We provide a necessary and sufficient condition for the existence of Nash equilibrium and characterize the equilibrium total effort for every agent. Our model has insightful results regarding the network type, that is, depending on whether the network is bipartite or nonbipartite. Finally, considering the sum of all expected utilities as an efficiency notion, we investigate the optimal network structure.     

Innovation contests with entry auction

We consider innovation contests for the procurement of an innovation under moral hazard and adverse selection. Innovators have private information about their abilities, and choose unobservable effort in order to produce innovations of random quality. Innovation quality is not contractible. We compare two procurement mechanisms—a fixed prize and a first-price auction. Before the contest, a fixed number of innovators is selected in an entry auction, in order to address the adverse selection problem. We find that–if effort and ability are perfect substitutes–both mechanisms implement the same innovations in symmetric pure-strategy equilibrium, regardless of whether the innovators’ private information is revealed or not. These equilibria are efficient if the procurer is a welfare-maximizer.     

Allocation of Prizes in Contests with Participation Constraints

We study all‐pay contests with an exogenous minimal effort constraint where a player can participate in a contest only if his effort (output) is equal to or higher than the minimal effort constraint. Contestants are privately informed about a parameter (ability) that affects their cost of effort. The designer decides about the size and number of prizes. We analyze the optimal prize allocation for the contest designer who wishes to maximize either the total effort or the highest effort. It is shown that if the minimal effort constraint is relatively high, the winner‐take‐all contest in which the contestant with the highest effort wins the entire prize sum does not maximize the expected total effort or the expected highest effort. Rather, a random contest in which the entire prize sum is equally allocated to all the participants yields a higher expected total effort as well as a higher expected highest effort.     

Efficient Contests

In their seminal contribution, Lazear and Rosen (1981) show that wages based upon rank induce the same efficient effort as incentive‐based reward schemes. They also show that this equivalence result is not robust toward heterogeneity in worker ability, as long as ability is private information because it is not possible to structure contests to simultaneously satisfy self‐selection constraints and first‐best incentives. This paper demonstrates that efficiency can be achieved by a simple modification of the prize scheme in a mixed (heterogenous) contest where contestants learn their type after entry. If contestants know their type before entering the contest, rent extraction becomes an issue. Implications for optimal contest design are also explored. Finally, the relationship between effort maximizing contests and profit maximizing contests are discussed.     

Profit sharing with a contest among agents

We consider how an internal competition in the form of a contest among agents can be combined with profit sharing in team production. The principal can choose to share between the principal and the agents as well as the sharing rule with a competitive contest among the agents. We show that under some conditions, a pure strategy equilibrium of profit sharing exists. In equilibrium, internal sharing involves a contest that is more competitive than proportional sharing, and the principal can get higher profit compared to proportional sharing.     

Self‐managed work teams: An efficiency‐rationale for pay compression

This paper uncovers a novel mechanism through which pay dispersion can have a negative effect on firm performance, even in the absence of equity or fairness considerations. We use a stylized model of a self‐managed work team to show that, when team‐work involves heterogeneous tasks, the provision of incentives to exert effort conflicts with the provision of incentives to share information relevant for decision‐making. Pay dispersion deteriorates information sharing as it induces workers to conceal “bad news” to maintain their coworkers motivation. The practical implications of our theory are that team empowerment should go hand in hand with pay compression and that empowerment should be avoided when team production involves strongly heterogeneous tasks.     

Contests with multiple alternative prizes: Public-good/bad prizes and externalities

We study contests in which there are multiple alternative public-good/bad prizes, and the players compete, by expending irreversible effort, over which prize to have awarded to them. Each prize may be a public good for some players and a public bad for the others, and the players expend their effort simultaneously and independently. We first prove the existence of a pure-strategy Nash equilibrium of the game, then establish when the total effort level expended for each prize is unique across the Nash equilibria, and then summarize and highlight other interesting and important properties of the equilibria. Finally, we discuss the effects of heterogeneity of valuations on the players’ equilibrium effort levels and a possible extension of the model.     

Inefficiency and complementarity in sharing games

A sharing game is a very simple device for partially reconciling an organization’s goal with the interests of its members. Each member chooses an action, bears its cost, and receives a share of the revenue which the members’ actions generate. A (pure-strategy) equilibrium of the game may be inefficient: surplus (revenue minus the sum of costs) may be less than maximal. In a previous paper, we found that for a wide class of reward functions, no one squanders at an inefficient equilibrium (spends more than at an efficient profile) if the revenue function has a complementarity property. In the present paper, we examine the “opposite” of the complementarity property (Substitutes) and we study a class of finite games where squandering equilibria indeed occur if Substitutes holds strongly enough. Squandering equilibria play a key role when one traces the effect of technological improvement on a sharing game’s surplus shortfall. We then turn to the question of choice among reward functions in a principal/agents setting. We find that if we again assume complementarity then strong conclusions can be reached about the reward functions preferred by “society”, by the players (agents), and by the principal.     

Robust results on the sharing of firm-specific information: Incentives and welfare effects

Contrary to much of the existing literature, we obtain robust and clear-cut results for the incentives and welfare effects of information sharing when information is firm-specific. We show that firms’ incentives to share this type of information are aligned with social welfare. Whenever revealing information is the dominant strategy (such as for Cournot firms revealing costs or Cournot and Bertrand firms revealing demand), it is socially beneficial. Only cost information in Bertrand competition will not be revealed but this is socially desirable, too. These findings are independent of distributional assumptions on random shocks and signals and hold for general asymmetric oligopoly with any mixture of substitute, complementary and independent goods.     

Deadlines in stochastic contests

We consider a two-player contest model in which breakthroughs arrive according to privately observed Poisson processes. Each player’s process continues as long as she exerts costly effort. The player who collects the most breakthroughs until a predetermined deadline wins a prize.We derive Nash equilibria of the game depending on the deadline. For short deadlines, there is a unique equilibrium in which players use identical cutoff strategies, i.e., they continue until they have a certain number of successes. If the deadline is long enough, the symmetric equilibrium distribution of an all-pay auction is an equilibrium distribution over successes in the contest. Expected efforts may be maximal for a short or intermediate deadline.     

信息分享对原始设备制造商与其合同制造商竞争的影响

研究了原始设备制造商的预测信息分享对一个原始设备制造商和一个与其同时有合作和竞争的合同制造商组成的供应链系统的影响,建立制造商间信息分享的模型,该模型包括一个原始设备制造商和一个合同制造商。研究发现,原始设备制造商关于市场潜在需求预测信息的分享对其预期利润是不利的,同时需求信息预测的精度对原始设备制造商信息分享的决策也有影响,原始设备制造商没有动机与其供应链成员进行信息分享,但信息分享使得供应链整体利润增加。最后,建立一个信息分享补偿机制分享供应链利润的增加量,以期通过信息分享补偿机制促使原始设备制造商有动机进行信息分享,从而实现其与合同制造商的“双赢”。     

Interactions Between Organizational Culture,Trustworthiness, and Mechanisms for Inter‐Project Knowledge Sharing

This research used a multiple‐case study approach to empirically investigate the complex relationship between factors influencing inter‐project knowledge sharing—trustworthiness, organizational culture, and knowledge‐sharing mechanisms. Adopting a competing values framework, we found evidence of patterns existing between the type of culture, on the project management unit level, and project managers’ perceptions of valuing trustworthy behaviors and the way they share knowledge, on the individual level. We also found evidence for mutually reinforcing the effect of trust and clan culture, which shape tacit knowledge‐sharing behaviors.     

The relationship between product market competition and unemployment with profit sharing

We investigate the implications of product market imperfections on negotiated wages and equilibrium unemployment under profit sharing. We show that intensified product market competition reduces equilibrium unemployment in a strictly monotonic way when the trade union's bargaining power exceeds the profit share. If the profit share exceeds the trade union's bargaining power, the effect of product market competition is ambiguous: there is a threshold for the benefit–replacement ratio above (below) which intensified product market competition increases (decreases) equilibrium unemployment. The profit share and the union's bargaining power affect the wage mark-up, and thereby equilibrium unemployment, in different directions.