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Race meets bargaining in product development

Author

Listed:
  • Emin Karagözoğlu
  • Kerim Keskin
  • Çağrı Sağlam

Abstract

We study product development in a firm, utilizing a multistage contest model (i.e., race) with an endogenous length (with one stage or two stages) between two workers. We model the payments to workers using the normatively appealing Nash bargaining solution. We analytically characterize the equilibrium effort levels of workers and describe the conditions under which a full‐fledged final product (as opposed to, say, a prototype) is developed. We also provide an answer to the firm's problem of optimal incentive provision.

Suggested Citation

  • Emin Karagözoğlu & Kerim Keskin & Çağrı Sağlam, 2021. "Race meets bargaining in product development," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 42(3), pages 702-709, April.
    • Handle: RePEc:wly:mgtdec:v:42:y:2021:i:3:p:702-709
    DOI: 10.1002/mde.3266
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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