Reach for the stars: A strategic bidding game

We examine two-sided competition in a duopoly market for differentiated pro ducts. Downstream, the two firms compete in prices. Upstream, they compete in bidding to hire talent input and there is one unique superstar. The outc ome depends on the downstream effect of only one firm employing the superst ar. When this intensifies downstream competition, both firms are worse off than they would be if no superstar talent were available. When the hiring o f the superstar softens downstream competition, both firms benefit, but a ' winner's curse' emerges in which the firm winning the superstar talent earn s less profit than its rival.