Performance bundling in multi-dimensional competitions

Jingfeng Lu, Bo Shen and Zhewei Wang

International Journal of Industrial Organization, 2024, vol. 95, issue C

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.

Keywords: Multi-dimensional contest; Performance bundling; Cost-saving effect; Unbalancing effect (search for similar items in EconPapers)
JEL-codes: C72 D72 D74 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:indorg:v:95:y:2024:i:c:s0167718724000286

DOI: 10.1016/j.ijindorg.2024.103073

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