Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/19122
Authors: 
Meland, Frode
Straume, Odd Rune
Year of Publication: 
2006
Series/Report no.: 
CESifo Working Paper 1658
Abstract: 
We study ex post outsourcing of production in an imperfectly discriminating contest, interpreted here as a research tournament or a procurement contest for being awarded some production contract. We find that the possibility of outsourcing increases competition between the contestants, leading to higher total contest effort, unless the ex-post bargaining strength of the contest winner is sufficiently low and/or there are very few contestants. However, even in the case of two contestants, outsourcing reduces the procurement costs of inducing a given level of effort if the contest organizer can collect entry fees. With respect to contest design, this suggests that outsourcing should generally be allowed if the objective is to induce stronger competition.
Subjects: 
contests
outsourcing
bargaining
contest design
JEL: 
L24
L23
D44
Document Type: 
Working Paper

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