Sorting into Contests: Evidence from Production Contracts

Wang Zhen and Tomislav Vukina
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Wang Zhen: The Brattle Group, San Francisco, CA, USA

The B.E. Journal of Economic Analysis & Policy, 2019, vol. 19, issue 1, 15

Abstract: In this paper, we investigate sorting patterns among chicken producers who are offered a menu of contracts to choose from. We show that the sorting equilibrium reveals a positive sorting where higher ability producers self-select themselves into contracts to grow larger chickens and lower ability types self-select themselves into contracts to grow smaller birds. We also show that eliciting this type of sorting behavior is profit maximizing for the principal. In the empirical part of the paper, we first estimate growers’ abilities using a two-way fixed effects model and subsequently use these estimated abilities to estimate a random utility model of contract choice. Our empirical results are supportive of the developed theory.

Keywords: hiring; incentives; cardinal tournaments (search for similar items in EconPapers)
JEL-codes: D86 J43 M52 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (1)

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DOI: 10.1515/bejeap-2018-0049

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