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Equilibrium Contingent Compensation in Contests with Delegation

Kyung Hwan Baik

Southern Economic Journal, 2007, vol. 73, issue 4, 986–1002

Abstract: We consider two-player contests in which each player hires a delegate who expends his effort to win a prize on the player's behalf. Endogenizing delegation contracts, we focus on the equilibrium contracts between the players and their delegates. We first show that each player's equilibrium contract is a no-win–no-pay contract. Then, we examine the delegates' equilibrium compensation spreads, effort levels, probabilities of winning, expected payoffs, and the players' equilibrium expected payoffs. We show that economic rents for the delegates may exist.

JEL-codes: D72 (search for similar items in EconPapers)
Date: 2007
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Handle: RePEc:sej:ancoec:v:73:4:y:2007:p:986-1002