The role of budget constraints in sequential elimination tournaments

Malin Arve and Olga Chiappinelli

Motivated by the EU concept of Pre-Commercial Procurement and the massivepresence of SMEs in the European economy, we study how budget constraints affect R&D effort in sequential elimination tournaments. We show that introducingbudget constraints leads to a non-monotonicity in unconstrained contestants' effort.Furthermore, we show that if the budget asymmetry is not too large, unconstrainedcontestants exert higher effort than when faced with unconstrained contestants only.

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Year of publication:	2018
Authors:	Arve, Malin ; Chiappinelli, Olga
Publisher:	Berlin : DIW Berlin, German Institute for Economic Research
Subject:	Pre-Commercial Procurement \| Contests \| Budget constraints \| Budgetrestriktion \| Budget constraint \| Öffentlicher Auftrag \| Public contract \| Extensives Spiel \| Extensive form game \| Wettbewerb \| Competition \| Auktionstheorie \| Auction theory