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Performance bundling in multi-dimensional competitions

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Listed:
  • Lu, Jingfeng
  • Shen, Bo
  • Wang, Zhewei

Abstract

In this paper, we investigate circumstances in which performance bundling can be used as an effective instrument to foster effort supply in multi-dimensional competitions between two (possibly asymmetric) players. We find that besides a beneficial cost-saving effect that is diminishing with the asymmetry across players, performance bundling can cause a counterproductive unbalancing effect, which intensifies with this asymmetry. Thus, performance bundling (pure or partial) is desirable only if the players are sufficiently symmetric. Otherwise, a set of separate contests is optimal. Our model provides a new perspective for analyzing incentive schemes in contest environments that involve competitions in multiple dimensions.

Suggested Citation

  • Lu, Jingfeng & Shen, Bo & Wang, Zhewei, 2024. "Performance bundling in multi-dimensional competitions," International Journal of Industrial Organization, Elsevier, vol. 95(C).
    • Handle: RePEc:eee:indorg:v:95:y:2024:i:c:s0167718724000286
    DOI: 10.1016/j.ijindorg.2024.103073
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    More about this item

    Keywords

    Multi-dimensional contest; Performance bundling; Cost-saving effect; Unbalancing effect;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions

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