Tournaments, Coalitions, and Truthfulness

36 Pages Posted: 16 Apr 2004 Last revised: 22 Feb 2008

See all articles by Murray Brown

Murray Brown

SUNY at Buffalo, College of Arts & Sciences, Department of Economics

Shin-Hwan Chiang

York University - Department of Economics

Date Written: February 2008

Abstract

We examine the role of coalitions and their members' private information honesty-cheating strategies within a standard industrial politics tournament model. It is first established that honesty supports a sequential equilibrium in both two- and three-member coalitions. Second, a Lazear-type (1989) model (identical risk averse agents condition their optimal choices of effort and sabotage on a prize set by a principal) is extended to allow for coalitions. Using a sequential coalition formation model with a coalition externality (larger coalitions make self-enforcing sabotage and synergy strategies more effective), coalition members coordinate their sabotage-synergy activities. Our main result is a sufficient condition for the existence of the equilibrium coalition structure: if the coalitional externality is sufficiently large, a subcoalition obtains, but if it is sufficiently small the grand coalition obtains, in which case, industrial politics vanish. Moreover, the received tournament model will never be predicted. These results are justified on efficiency grounds.

Keywords: Noncooperative Games, Organizational Behavior, Wage Level and Structure, Contracts

JEL Classification: C72, D23, J31, J41

Suggested Citation

Brown, Murray and Chiang, Shin-Hwan, Tournaments, Coalitions, and Truthfulness (February 2008). Available at SSRN: https://ssrn.com/abstract=530902 or http://dx.doi.org/10.2139/ssrn.530902

Murray Brown

SUNY at Buffalo, College of Arts & Sciences, Department of Economics ( email )

Fronczak Hall
Buffalo, NY 14260
United States
716-838-1941 (Phone)
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Shin-Hwan Chiang (Contact Author)

York University - Department of Economics ( email )

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Toronto, Ontario M3J 1P3
Canada
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