|By:||Herrera, Helios (HEC Montreal)
Reuben, Ernesto (Columbia University)
Ting, Michael M. (Columbia University)
Turf wars commonly occur in environments where competition undermines collaboration. We develop a game theoretic model and experimental test of turf wars. The model explores how team production incentives ex post affect team formation decisions ex ante. In the game, one agent decides whether to share jurisdiction over a project with other agents. Agents with jurisdiction decide whether to exert effort and receive a reward based on their relative performance. Hence, sharing can increase joint production but introduces competition for the reward. We find that collaboration has a non-monotonic relationship with both productivity and rewards. The laboratory experiment confirms the model’s main predictions. We also explore extensions of the basic model, including one where each agent’s productivity is private information.
|Keywords:||turf war, bureaucracy, jurisdiction, competition, information withholding|
|JEL:||D73 D74 D82|
==Noted by yinung==
|By:||Steffen Huck (Wissenschaftszentrum Berlin für Sozialforschung (WZB))
Gabriele Lünser (University College London – Centre for Economic Learning and Social Evolution (ELSE))
Florian Spitzer (Department of Economics, Vienna Center for Experimental Economics (VCEE), University of Vienna)
Jean-Robert Tyran (Department of Economics, Copenhagen University)
In a laboratory experiment designed to capture key aspects of the interaction between physicians and patients in a stylized way, we study the effects of medical insurance and competition in the guise of free choice of physician. Medical treatment is an example of a credence good: only the physician (but not the patient) knows the appropriate treatment, and even after consulting, the patient is not sure whether he got proper treatment or got an unnecessary treatment, i.e. was overtreated. We find that with insurance, moral hazard looms on both sides of the market: patients consult more often and physicians overtreat more often than in the baseline condition. Competition decreases overtreatment compared to the baseline and patients therefore consult more often. When the two institutions are combined, competition is found to partially offset the adverse effects of insurance: most patients seek treatment, but overtreatment is moderated.
|Keywords:||Credence good, Patient, Physician, Overtreatment, Competition, Insurance, Moral hazard|
|JEL:||C91 I11 I13|
This paper examines the informativeness of consumer information networks and their effect on price competition between .rms. Under the proposed information mechanism, consumers share their initial information with the members of their network and as such become better informed. The main result of this paper shows how informative such networks are by characterizing how many different pieces of information a network is likely to contain. This informativeness is crucial for the degree of competition, as consumers comparing more prices induce firms to compete more fiercely. We find that larger networks imply better information transmission, which intensifies competition and decreases all the percentiles of the price distribution. An increase in the number of firms makes networks more informative, and decreases all the percentiles as well. Our results are robust to the introduction of sequential search and network segregation, but an increase in segregation decreases information transmission and increases all percentiles.
Unequally-distributed resources, whether people’s income or competence, are ubiquitous in our real world. Whether to promote competition or to lead to a more equal environment is often in question in societies or organizations. With heterogeneous endowments, we let subjects collectively choose whether to have a competitive lottery contest – where only one individual in a group wins and receives an award, generating a greater income inequality – or to have a public good that benefits the less-endowed to a greater degree. Our data indicates that highly-endowed individuals contribute little when the public good is selected. The majority of subjects, however, vote in favor of having a public good, contrary to the standard theory predictions. In addition, a belief elicitation task shows that they expect payoffs to be more equally distributed under the public good regime than under the contest regime. Moreover, the subjects’ preferences between the two regimes are little affected by their risk attitudes or the size of awards in competition. These suggest that people’s institutional choices are driven more by their income inequality-averse preferences.
|Keywords:||heterogeneity, experiment, cooperation, competition, public goods, inequality|
|JEL:||C92 D63 D70 D72 H4|
Martin F Hellwig (1980) “On the aggregation of information in competitive markets." Journal of Economic Theory, Volume 22, Issue 3, June 1980, Pages 477–498. http://dx.doi.org/10.1016/0022-0531(80)90056-3,
Hidden Information, Bargaining Power, And Efficiency: An Experiment
|By:||Antonio Cabrales (Departamento de Economía – Universidad Carlos III de Madrid)
Gary Charness (Department of Economics, University of California – University of California, Santa Barbara)
Marie-Claire Villeval (GATE Lyon Saint-Etienne – Groupe d’analyse et de théorie économique – CNRS : UMR5824 – Université Lumière – Lyon II – École Normale Supérieure de Lyon)
We devise an experiment to explore the effect of different degrees of bargaining power on the design and the selection of contracts in a hidden-information context. In our benchmark case, each principal is matched with one agent of unknown type. In our second treatment, a principal can select one of three agents, while in a third treatment an agent may choose between the contract menus offered by two principals. We first show theoretically how different ratios of principals and agents affect outcomes and efficiency. Informational asymmetries generate inefficiency. In an environment where principals compete against each other to hire agents, these inefficiencies may disappear, but they are insensitive to the number of principals. In contrast, when agents compete to be hired, efficiency improves dramatically, and it increases in the relative number of agents because competition reduces the agents’ informational monopoly power. However, this environment also generates a high inequality level and is characterized by multiple equilibria. In general, there is a fairly high degree of correspondence between the theoretical predictions and the contract menus actually chosen in each treatment. There is, however, a tendency to choose more ‘generous’ (and more efficient) contract menus over time. We find that competition leads to a substantially higher probability of trade, and that, overall, competition between agents generates the most efficient outcomes.
|Keywords:||experiment; hidden information; bargaining power; competition; efficiency|