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Incentives in Contests with Heterogeneous Solvers

Author

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  • Ersin Körpeoğlu

    (School of Management, University College London, London E14 5AB, United Kingdom)

  • Soo-Haeng Cho

    (Tepper School of Business, Carnegie Mellon University, Pittsburgh, Pennsylvania 15213)

Abstract

In a contest in which solvers with heterogeneous expertise exert effort to develop solutions, a recent paper [Terwiesch C, Xu Y (2008) Innovation contests, open innovation, and multiagent problem solving. Management Sci. 54(9):1529–1543] argues that as more solvers enter the contest, every solver will reduce effort due to a lower probability of winning the contest. This paper corrects mistakes in this theory, and shows that there exist high-expertise solvers who may raise their effort in response to increased competition. This is because more entrants raise the expected best performance among other solvers, creating positive incentives for solvers to exert higher effort to win the contest. Because of this positive effect, we find that a free-entry open contest is more likely to be optimal to a contest organizer than what Terwiesch and Xu (2008) and other prior literature asserted.

Suggested Citation

  • Ersin Körpeoğlu & Soo-Haeng Cho, 2018. "Incentives in Contests with Heterogeneous Solvers," Management Science, INFORMS, vol. 64(6), pages 2709-2715, June.
    • Handle: RePEc:inm:ormnsc:v:64:y:2018:i:6:p:2709-2715
    DOI: 10.287/mnsc.2017.2738
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    References listed on IDEAS

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