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The B.E. Journal of Economic Analysis & Policy

Editor-in-Chief: Ludwig, Sandra / Schmitz, Hendrik

Ed. by Auriol, Emmanuelle / Barigozzi, Francesca / Brunner, Johann / Fleck, Robert / Mastrobuoni, Giovanni / Mendola, Mariapia / Requate, Till / de Vries, Frans / Wenzel, Tobias / Zulehner, Christine


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Volume 19, Issue 1

Issues

Volume 19 (2019)

Volume 6 (2006)

Volume 4 (2004)

Volume 2 (2002)

Volume 1 (2001)

Sorting into Contests: Evidence from Production Contracts

Zhen Wang / Tomislav Vukina
Published Online: 2019-01-05 | DOI: https://doi.org/10.1515/bejeap-2018-0049

Abstract

In this paper, we investigate sorting patterns among chicken producers who are offered a menu of contracts to choose from. We show that the sorting equilibrium reveals a positive sorting where higher ability producers self-select themselves into contracts to grow larger chickens and lower ability types self-select themselves into contracts to grow smaller birds. We also show that eliciting this type of sorting behavior is profit maximizing for the principal. In the empirical part of the paper, we first estimate growers’ abilities using a two-way fixed effects model and subsequently use these estimated abilities to estimate a random utility model of contract choice. Our empirical results are supportive of the developed theory.

Keywords: hiring; incentives; cardinal tournaments

JEL Classification: M52; J43; D86

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About the article

Published Online: 2019-01-05


Citation Information: The B.E. Journal of Economic Analysis & Policy, Volume 19, Issue 1, 20180049, ISSN (Online) 1935-1682, DOI: https://doi.org/10.1515/bejeap-2018-0049.

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