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Title of Journal: Public Choice

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Abbravation: Public Choice

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Kluwer Academic Publishers-Plenum Publishers

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10.1002/pds.1611

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1573-7101

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Outsourcing in contests

Authors: Frode Meland Odd Rune Straume
Publish Date: 2006/11/29
Volume: 131, Issue: 3-4, Pages: 315-331
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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 tradeoff between ex ante and ex post efficiency

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