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Structural Estimation of Rank‐Order Tournament Games with Private Information
Author(s) -
Vukina Tomislav,
Zheng Xiaoyong
Publication year - 2007
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.1111/j.1467-8276.2007.01008.x
Subject(s) - tournament , rank (graph theory) , private information retrieval , order (exchange) , nash equilibrium , settlement (finance) , welfare , microeconomics , complete information , economics , estimation , econometrics , mathematics , mathematical economics , statistics , combinatorics , market economy , finance , management , payment
In this article we propose and solve a game‐theoretic model of a rank‐order tournament with private information. Using the contract settlement data from a poultry company, we estimate a fully structural model of a symmetric Nash equilibrium of this game. We show that growers' equilibrium effort depends on four factors: the spread in piece rates between the performance brackets, the number of players in each tournament, the number of performance brackets used, and the density of growers' private shocks. We use estimates to simulate how changes in the tournament characteristics affecting equilibrium effort impact the growers' and the integrator's welfare.