American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Optimal Design of Research Contests
American Economic Review
(pp. 646–671)
Abstract
Procurement of an innovation often requires substantial effort by potential suppliers. Motivating effort may be difficult if the level of effort and quality of the resulting innovation are unverifiable, if innovators cannot benefit directly by marketing their innovations, and if the buyer cannot extract up-front payments from suppliers. We study the use of contests to procure an innovation in such an environment. An auction in which two suppliers are invited to innovate and then bid their prizes is optimal in a large class of contests. If contestants are asymmetric, it is optimal to handicap the most efficient one.Citation
Che, Yeon-Koo, and Ian Gale. 2003. "Optimal Design of Research Contests ." American Economic Review 93 (3): 646–671. DOI: 10.1257/000282803322157025JEL Classification
- O32 Management of Technological Innovation and R&D
- C70 Game Theory and Bargaining Theory: General
- D44 Auctions