Allocating Ideas: Horizontal Competition in Tournaments

Juan-José Ganuza and Esther Hauk

Journal of Economics & Management Strategy, 2006, vol. 15, issue 3, 763-787

Abstract: We develop a stylized model of horizontal and vertical competition in tournaments with two competing firms. The sponsor cares not only about the quality of the design but also about the design location. A priori not even the sponsor knows his preferred design location, which is only discovered once he has seen the actual proposals. We show that the more efficient firm is more likely to be conservative when choosing the design location. Also, to get some differentiation in design locations, the cost difference between contestants can be neither too small nor too big. Therefore, if the sponsor mainly cares about the design location, participation in the tournaments by the two lowest‐cost contestants cannot be optimal for the sponsor.

Date: 2006
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Citations: View citations in EconPapers (7)

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https://doi.org/10.1111/j.1530-9134.2006.00117.x

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Working Paper: Allocating ideas: Horizontal competition in tournaments (2002)
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