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Cover of: Contests with Bilateral Delegation: Unobservable Contracts
Jihyun Kim, Kyung Hwan Baik

Contests with Bilateral Delegation: Unobservable Contracts

Section: Articles
Volume 170 (2014) / Issue 3, pp. 387-405 (19)
Published 09.07.2018
DOI 10.1628/093245614X13946975834836
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  • 10.1628/093245614X13946975834836
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Summary
We study two-player contests in which, in order to win a prize, each player hires a delegate to expend effort on her behalf; neither party's delegation contract is revealed to the rival party when the delegates choose their effort levels. We obtain first the outcomes of this unobservable-contracts case. Next, we perform comparative statics of these outcomes with respect to the higher-valuation player's valuation for the prize. Finally, we compare the outcomes of the unobservable-contracts case with those of the observable-contracts case. We find, among other things, that the unobservability of delegation contracts narrows the gap between the delegates' equilibrium contingent compensation. (JEL: D72)