Partners or Rivals? An Experimental Study of a Two-Stage Tournament

Hong Chao; Chun-Yu Ho; Shaoqing Huang; Xiangdong Qin; Jiajia Cong

doi:10.1016/j.jebo.2018.11.023

Partners or Rivals? An Experimental Study of a Two-Stage Tournament

Hong Chao^*, Chun-Yu Ho, Shaoqing Huang, Xiangdong Qin, Jiajia Cong

^*Corresponding author for this work

Research output: Journal Publications and Reviews › RGC 21 - Publication in refereed journal › peer-review

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Abstract

We consider a two-stage tournament in which two alliances compete in stage one. Members of the winning alliance then compete against each other in stage two. Members’ investment in stage one could increase their alliance’s winning probability, but could also be appropriated and used against them by their partners-turned-rivals in stage two. This hold-up problem creates a negative incentive for within-alliance cooperation. We test this theoretical benchmark in an experiment. In a second experiment, we investigate whether ex-ante informal agreements deter appropriation. We find that such agreements are honored, and thus encourage investments, only under the fixed matching condition.

© 2018 Elsevier B.V. All rights reserved.

Original language	English
Pages (from-to)	288-310
Journal	Journal of Economic Behavior & Organization
Volume	158
Online published	6 Dec 2018
DOIs	https://doi.org/10.1016/j.jebo.2018.11.023
Publication status	Published - Feb 2019
Externally published	Yes

Research Keywords

Two-stage tournament
Alliance
Hold-up problem
Appropriation
Informal agreement

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title = "Partners or Rivals? An Experimental Study of a Two-Stage Tournament",

abstract = "We consider a two-stage tournament in which two alliances compete in stage one. Members of the winning alliance then compete against each other in stage two. Members{\textquoteright} investment in stage one could increase their alliance{\textquoteright}s winning probability, but could also be appropriated and used against them by their partners-turned-rivals in stage two. This hold-up problem creates a negative incentive for within-alliance cooperation. We test this theoretical benchmark in an experiment. In a second experiment, we investigate whether ex-ante informal agreements deter appropriation. We find that such agreements are honored, and thus encourage investments, only under the fixed matching condition. {\textcopyright} 2018 Elsevier B.V. All rights reserved.",

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author = "Hong Chao and Chun-Yu Ho and Shaoqing Huang and Xiangdong Qin and Jiajia Cong",

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T1 - Partners or Rivals? An Experimental Study of a Two-Stage Tournament

AU - Chao, Hong

AU - Ho, Chun-Yu

AU - Huang, Shaoqing

AU - Qin, Xiangdong

AU - Cong, Jiajia

PY - 2019/2

Y1 - 2019/2

N2 - We consider a two-stage tournament in which two alliances compete in stage one. Members of the winning alliance then compete against each other in stage two. Members’ investment in stage one could increase their alliance’s winning probability, but could also be appropriated and used against them by their partners-turned-rivals in stage two. This hold-up problem creates a negative incentive for within-alliance cooperation. We test this theoretical benchmark in an experiment. In a second experiment, we investigate whether ex-ante informal agreements deter appropriation. We find that such agreements are honored, and thus encourage investments, only under the fixed matching condition. © 2018 Elsevier B.V. All rights reserved.

AB - We consider a two-stage tournament in which two alliances compete in stage one. Members of the winning alliance then compete against each other in stage two. Members’ investment in stage one could increase their alliance’s winning probability, but could also be appropriated and used against them by their partners-turned-rivals in stage two. This hold-up problem creates a negative incentive for within-alliance cooperation. We test this theoretical benchmark in an experiment. In a second experiment, we investigate whether ex-ante informal agreements deter appropriation. We find that such agreements are honored, and thus encourage investments, only under the fixed matching condition. © 2018 Elsevier B.V. All rights reserved.

KW - Two-stage tournament

KW - Alliance

KW - Hold-up problem

KW - Appropriation

KW - Informal agreement

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UR - https://www.scopus.com/record/pubmetrics.uri?eid=2-s2.0-85057868261&origin=recordpage

U2 - 10.1016/j.jebo.2018.11.023

DO - 10.1016/j.jebo.2018.11.023

M3 - RGC 21 - Publication in refereed journal

SN - 0167-2681

VL - 158

SP - 288

EP - 310

JO - Journal of Economic Behavior & Organization

JF - Journal of Economic Behavior & Organization

ER -

Partners or Rivals? An Experimental Study of a Two-Stage Tournament

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Research Keywords

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