Provision of Differentiated Public Goods within Organizations

Abstract

This paper analyzes a spatial competition model in which a moderate principal assigns implementation of a differentiated task to one of two extreme agents. An appointed agent then gets the opportunity to choose a variety to implement but has to carry a cost of implementation. If a cost is lower than a benefit from having their preferred variety implemented then the agents seek assignment and so both participate in the contest. The agents want to make themselves an attractive choice and so propose moderate (still divergent) varieties if implementation is costly, and the principal's preferred variety if implementation is not costly. However, if the cost exceeds the benefit from having their preferred variety implemented then the agents want to avoid assignment. My results suggest that in this case, only one agent participates in the contest while the other exits the competition.