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Using Auctions To Reward Tournament Winners: Theory and Experimental Investigations

Author

Listed:
  • Richard L. Fullerton
  • Bruce G. Linster
  • Michael McKee
  • Stephen Slate

Abstract

This article explores theoretical and experimental implications of using auctions to reward winners of research tournaments. This process is a hybrid of the research tournament for a prize and a first-price auction held after the research is complete. The bids in the auction consist of a vector of both quality of the innovation and price. The experimental evidence supports the hypothesis that conducting auctions at the end of research tournaments will generally reduce the sponsor's prize expenditure relative to fixed-prize research tournaments. The potential importance of these results to the U.S. Department of Defense acquisition process is emphasized.

Suggested Citation

  • Richard L. Fullerton & Bruce G. Linster & Michael McKee & Stephen Slate, 2002. "Using Auctions To Reward Tournament Winners: Theory and Experimental Investigations," RAND Journal of Economics, The RAND Corporation, vol. 33(1), pages 62-84, Spring.
  • Handle: RePEc:rje:randje:v:33:y:2002:i:spring:p:62-84
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    Citations

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    Cited by:

    1. Jean-Michel Benkert & Igor Letina, 2016. "Designing dynamic research contests," ECON - Working Papers 235, Department of Economics - University of Zurich.
    2. Amihai Glazer, 2008. "Bargaining with Rent Seekers," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 10(5), pages 859-871, October.
    3. Letina, Igor & Benkert, Jean-Michel, 2016. "Designing Dynamic Research Tournaments," Annual Conference 2016 (Augsburg): Demographic Change 145738, Verein für Socialpolitik / German Economic Association.
    4. Giebe, Thomas, 2014. "Innovation contests with entry auction," Journal of Mathematical Economics, Elsevier, vol. 55(C), pages 165-176.
    5. Anja Schöttner, 2008. "Fixed-prize tournaments versus first-price auctions in innovation contests," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 35(1), pages 57-71, April.
    6. Prüfer, J., 2009. "Semi-Public Contests," Discussion Paper 2009-33, Tilburg University, Center for Economic Research.
    7. Jason Shachat & J. Todd Swarthout, 2010. "Procurement Auctions for Differentiated Goods," Decision Analysis, INFORMS, vol. 7(1), pages 6-22, March.
    8. repec:eee:indorg:v:52:y:2017:i:c:p:393-426 is not listed on IDEAS
    9. repec:wyi:journl:002123 is not listed on IDEAS
    10. Todd R. Kaplan & Shmuel Zamir, 2014. "Advances in Auctions," Discussion Papers 1405, Exeter University, Department of Economics.
    11. David Hendry, 2010. "Climate Change: Lessons for our Future from the Distant Past," Economics Series Working Papers 485, University of Oxford, Department of Economics.
    12. Letina, Igor & Schmutzler, Armin, 2015. "Designing Innovation Contests for Diversity," CEPR Discussion Papers 10736, C.E.P.R. Discussion Papers.
    13. Igor Letina & Armin Schmutzler, 2015. "Inducing variety: a theory of innovation contests," ECON - Working Papers 200, Department of Economics - University of Zurich, revised Jun 2017.
    14. Donja Darai & Jens Grosser & Nadja Trhal, 2009. "Patents versus Subsidies � A Laboratory Experiment," SOI - Working Papers 0905, Socioeconomic Institute - University of Zurich.
    15. Nicola Dimitri, 2012. "Some Law & Economics Considerations on the EU Pre-Commercial Procurement of Innovation," Working Papers 2012/10, Maastricht School of Management.
    16. Kaplan, Todd R. & Zamir, Shmuel, 2015. "Advances in Auctions," Handbook of Game Theory with Economic Applications, Elsevier.
    17. repec:pit:wpaper:205 is not listed on IDEAS
    18. J. Todd Swarthout & Jason Shachat, 2004. "The performance of reverse auctions versus request for quotes when procuring goods with quality differences," Econometric Society 2004 North American Winter Meetings 255, Econometric Society.

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