Optimal decision of aggregation method in group contest: Going all out vs. staying half-hearted

Abstract

A two-stage-two-group contest is studied. In stage 1, each group members decide aggregation method that transforms their efforts into group performance. In stage 2, members in groups exert efforts to win a group-specific public-good prize. Members have different valuations on the prize and thus have different preferences in deciding aggregation rule. We find that the all-out type of aggregation method gets a more group-efficient outcome than the half-hearted type; the group-efficient choice can be reached through a side-payment delegation contract; and both groups choose the all-out aggregation method in equilibrium.