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Optimal Design of Research Contests

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Author Info
Yeon-Koo Che
Ian Gale

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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.

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File URL: http://hdl.handle.net/10.1257/000282803322157025
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Publisher Info
Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 93 (2003)
Issue (Month): 3 (June)
Pages: 646-671
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Handle: RePEc:aea:aecrev:v:93:y:2003:i:3:p:646-671

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. French, Kenneth R & McCormick, Robert E, 1984. "Sealed Bids, Sunk Costs, and the Process of Competition," Journal of Business, University of Chicago Press, vol. 57(4), pages 417-41, October. [Downloadable!] (restricted)
  2. Aghion, Philippe & Tirole, Jean, 1997. "Formal and Real Authority in Organizations," Journal of Political Economy, University of Chicago Press, vol. 105(1), pages 1-29, February.
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  3. Felli, Leonardo & Roberts, Kevin W S, 2002. "Does Competition Solve the Hold-up Problem?," CEPR Discussion Papers 3535, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  4. Yeon-Koo Che & Donald B. Hausch, 1999. "Cooperative Investments and the Value of Contracting," American Economic Review, American Economic Association, vol. 89(1), pages 125-147, March. [Downloadable!] (restricted)
  5. Aghion, Philippe & Bolton, Patrick, 1992. "An Incomplete Contracts Approach to Financial Contracting," Review of Economic Studies, Blackwell Publishing, vol. 59(3), pages 473-94, July. [Downloadable!] (restricted)
  6. Yeon-Koo Che & Ian Gale, 2000. "Optimal Design of Research Contests," Econometric Society World Congress 2000 Contributed Papers 1784, Econometric Society. [Downloadable!]
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  7. Baye, M.R. & Kovenock, D. & De Vries, C.G., 1992. "Rigging the Lobbying Process: An Application of the All- Pay Auction," Papers 9-92-2, Pennsylvania State - Department of Economics.
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  8. Harold L. Cole & George J. Mailath & Andrew Postlewaite, 1998. "Efficient non-contractible investments," Staff Report 253, Federal Reserve Bank of Minneapolis. [Downloadable!]
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  9. Dirk Bergemann & Juuso Vaimaki, 2000. "Information Acquisition and Efficient Mechanism Design," Cowles Foundation Discussion Papers 1248, Cowles Foundation, Yale University. [Downloadable!]
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  10. Yeon-Koo Che, 1993. "Design Competition through Multidimensional Auctions," RAND Journal of Economics, The RAND Corporation, vol. 24(4), pages 668-680, Winter. [Downloadable!] (restricted)
  11. Bag, Parimal Kanti, 1997. "Optimal auction design and R&D," European Economic Review, Elsevier, vol. 41(9), pages 1655-1674, December. [Downloadable!] (restricted)
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