Competing Teams in Large Markets: Free Entry Equilibrium with (Sub-)Optimal Contracts

Hideo Konishi and Dimitar Simeonov ()
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Dimitar Simeonov: Bahçeşehir University

No 1095, Boston College Working Papers in Economics from Boston College Department of Economics

Abstract: In this paper, we formalize a market with a large number of competing production teams following Alchian and Demsetz (1974). We allow for wide-spread externalities which can affect players’ payoffs. These externalities include changes in market conditions and pollutions, and may generate a variety of equilibrium outcomes. There are finite types of atomless players, who can form team-firms with finite memberships using available technologies. Given an arbitrary set of feasible partnership contracts for each team type, we consider free entry equilibrium as our equilibrium concept—in a free entry equilibrium, no team type can attract its members from other teams by proposing any implementable partnership contract. Furthermore, in a free entry equilibrium, players of the same type may have different payoffs—unequal treatment of equals. We show that as long as each firm type’s implementable payoff set is compact and continuous in externality variables, there exists a free entry equilibrium. We provide several applications of our results.

Keywords: competing teams; widespread externalities; unequal treatment of equals; free entry equilibrium; labor managed firms; coalition formation (search for similar items in EconPapers)
JEL-codes: C71 C78 D2 D4 (search for similar items in EconPapers)
Date: 2025-08-21
New Economics Papers: this item is included in nep-com and nep-mic
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