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Fixed-prize tournaments versus first-price auctions in innovation contests

  • Anja Schöttner

    ()

This paper analyzes a procurement setting with two identical firms and stochastic innovations. In contrast to the previous literature, I show that a procurer who cannot charge entry fees may prefer a fixed-prize tournament to a first-price auction since holding an auction may leave higher rents to firms when the innovation technology is subject to large random factors.

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File URL: http://hdl.handle.net/10.1007/s00199-007-0208-9
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Article provided by Springer in its journal Economic Theory.

Volume (Year): 35 (2008)
Issue (Month): 1 (April)
Pages: 57-71

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Handle: RePEc:spr:joecth:v:35:y:2008:i:1:p:57-71
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  1. Grund, Christian & Sliwka, Dirk, 2002. "Envy and Compassion in Tournaments," IZA Discussion Papers 647, Institute for the Study of Labor (IZA).
  2. Yeon-Koo Che & Ian Gale, 2000. "Optimal Design of Research Contests," Econometric Society World Congress 2000 Contributed Papers 1784, Econometric Society.
  3. Richard L. Fullerton & R. Preston McAfee, 1999. "Auctioning Entry into Tournaments," Journal of Political Economy, University of Chicago Press, vol. 107(3), pages 573-605, June.
  4. Bagnoli, M. & Bergstrom, T., 1989. "Log-Concave Probability And Its Applications," Papers 89-23, Michigan - Center for Research on Economic & Social Theory.
  5. Arozamena, Leandro & Cantillon, Estelle, 2001. "Investment Incentives in Procurement Auctions," CEPR Discussion Papers 2676, C.E.P.R. Discussion Papers.
  6. An, Mark Yuying, 1995. "Logconcavity versus Logconvexity: A Complete Characterization," Working Papers 95-03, Duke University, Department of Economics.
  7. Maskin, Eric & Riley, John, 2000. "Asymmetric Auctions," Review of Economic Studies, Wiley Blackwell, vol. 67(3), pages 413-38, July.
  8. Lebrun, Bernard, 1998. "Comparative Statics in First Price Auctions," Games and Economic Behavior, Elsevier, vol. 25(1), pages 97-110, October.
  9. 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.
  10. Fullerton, Richard, et al, 1999. "An Experimental Investigation of Research Tournaments," Economic Inquiry, Western Economic Association International, vol. 37(4), pages 624-36, October.
  11. Taylor, Curtis R, 1995. "Digging for Golden Carrots: An Analysis of Research Tournaments," American Economic Review, American Economic Association, vol. 85(4), pages 872-90, September.
  12. O'Keeffe, Mary & Viscusi, W Kip & Zeckhauser, Richard J, 1984. "Economic Contests: Comparative Reward Schemes," Journal of Labor Economics, University of Chicago Press, vol. 2(1), pages 27-56, January.
  13. Glenn C. Loury, 1976. "Market Structure and Innovation," Discussion Papers 256, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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