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Partners or rivals? An experimental study of a two-stage tournament

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  • Chao, Hong
  • Ho, Chun-Yu
  • Huang, Shaoqing
  • Qin, Xiangdong
  • Cong, Jiajia

Abstract

We consider a two-stage tournament in which two alliances compete in stage one. Members of the winning alliance then compete against each other in stage two. Members’ investment in stage one could increase their alliance's winning probability, but could also be appropriated and used against them by their partners-turned-rivals in stage two. This hold-up problem creates a negative incentive for within-alliance cooperation. We test this theoretical benchmark in an experiment. In a second experiment, we investigate whether ex-ante informal agreements deter appropriation. We find that such agreements are honored, and thus encourage investments, only under the fixed matching condition.

Suggested Citation

  • Chao, Hong & Ho, Chun-Yu & Huang, Shaoqing & Qin, Xiangdong & Cong, Jiajia, 2019. "Partners or rivals? An experimental study of a two-stage tournament," Journal of Economic Behavior & Organization, Elsevier, vol. 158(C), pages 288-310.
    • Handle: RePEc:eee:jeborg:v:158:y:2019:i:c:p:288-310
    DOI: 10.1016/j.jebo.2018.11.023
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    More about this item

    Keywords

    Two-stage tournament; Alliance; Hold-up problem; Appropriation; Informal agreement;
    All these keywords.

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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