DP12194 Competition and Networks of Collaboration

Author(s): Nikita Roketskiy
Publication Date: July 2017
Keyword(s): networks, tournaments
JEL(s): C71, D85
Programme Areas: Industrial Organization
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=12194

I develop a model of collaboration between tournament participants in which agents collaborate in pairs, and an endogenous structure of collaboration is represented by a weighted network. The agents are forward-looking and capable of coordination. They value collaboration with others and higher tournament rankings. I use von Neumann-Morgenstern stable sets as a solution. I find stable networks in which agents collaborate only within exclusive groups. Both absence of intergroup collaboration and excessive intragroup collaboration lead to inefficiency. I provide a necessary and sufficient condition for the stability of efficient outcomes in winner-takes-all tournaments. I show that the use of transfers does not repair efficiency.