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Optimal Allocation of Heterogeneous Agents in Contests

Martin Grossmann and Helmut Dietl

No 71, Working Papers from University of Zurich, Institute for Strategy and Business Economics (ISU)

Abstract: In this paper, we discuss a manager's allocation problem. Two managers allocate their heterogeneous employees - each manager allocates two high types and two low types - in groups of two in order to compete for an exogenous contest prize in a two period model. There are three possibilities of groups' constellation depending on manager's allocation decision: Strong groups (two high types), balanced groups (one high and one low type) and weak groups (two low types). These allocations determine the managers’ performance. We show that equilibria in a simultaneous as well as in a sequential game only depend on the difference of the heterogeneous groups' outputs. Furthermore, we show that there is no second mover advantage according this model. Therefore, firms' performances are independent of the model's timing. A typical application of the model fits to coaches’ decisions in ice hockey concerning the optimal constellation of the first, second, third (and so forth) lines.

Keywords: Contest; Sports Economics (search for similar items in EconPapers)
JEL-codes: D92 L83 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2007-09
New Economics Papers: this item is included in nep-spo
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