Outsourcing in contests

Abstract

We study ex post outsourcing of production in an imperfectly discriminating contest, interpreted here as a research tournament or a procurement contest for being awarded some production contract. We find that the possibility of outsourcing increases competition between the contestants, leading to higher total contest effort, if the contest winner is expected to obtain a sufficiently large share of ex post outsourcing rents. Under reasonable assumptions, outsourcing tends also to increase the number of active contestants, strengthening the case for outsourcing to increase total contest effort. If such effort is socially wasteful, outsourcing creates a welfare trade-off between ex ante and ex post efficiency. Copyright Springer Science+Business Media, LLC 2007Contests, Non-price competition, Outsourcing,

A research on equilibrium of outsourcing service competition with endogenous decisions order

“…Firstly, it assumes that the production functions of suppliers are the same to be ( ) ( 1,2) i i i C Q cQ i = = , but the service cost functions are different to be 1 1 1…”

“…It shows that when move sequence is endogenously determined, the suppliers' choice of move sequence will lead to sequential move equilibrium. Finally, it assumes that the production cost functions of two suppliers are the same to be ( ) ( 1,2) i i i C Q cQ i = = ,but the service functions are different to be 1 fig.4 can be attained according to the analysis above. fig.4 is (former move ,later move ).…”

“…Literature [2] and literature [3] introduce the contest model to outsourcing competition, discussing the problem of outsourcing competition and outsourcing service competition based on contest model. At present, the study of outsourcing service competition is mainly based on contest model [4], [5].…”

Strategy in Contests - An Introduction

“…Many participants Generalizing the symmetric Tullock contest with an arbitrary, but su¢ ciently small, r or the asymmetric Tullock contest with r = 1 to the case with any …nite number n > 2 is not a di¢ cult exercise. For comparative statics on more general contest success functions that are based on a ratio f (x i )= P f (x j ) but cover the case in (39) and asymmetric valuations, see Cornes and Hartley (2005) for existence, uniqueness, a characterization of the equilibrium and limit results, 19 and Stein (2002) and Meland and Straume (2005) for an elegant solution of the case (39).…”

“…The insight used in Stein (2002), Cornes and Hartley (2005) and Meland and Straume (2005) to solve for the case with asymmetric valuations of the prize results from the observation that the payo¤ of player i depends only on player i's own e¤ort and the sum of all other players'e¤ort. For this purpose, de…ne X = i=n i=1 x i and note that p…”