Contests With Delegation

ABSTRACT This paper studies winner‐takes‐all Tullock contests between two groups, each formed by a principal and a delegate. Principals allocate the monetary prize within their group, while delegates exert effort to win it. In equilibrium, the more productive delegate receives a smaller prize share while enjoying a higher expected payoff. Nevertheless, delegates' expected payoffs do not monotonically increase with their productivity. As productivity differences get wide enough, delegates' expected payoffs decline and tend to zero. Finally, a more balanced competition raises both delegates' efforts and prize shares, ultimately benefiting delegates' utilitarian welfare.