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Innovation Contests

  • David Pérez-Castrillo
  • David Wettstein

We study innovation contests with asymmetric information and identical contestants, where contestants' efforts and innate abilities generate inventions of varying qualities. The designer offers a reward to the contestant achieving the highest quality and receives the revenue generated by the innovation. We characterize the equilibrium behavior, outcomes and payoffs for both nondiscriminatory and discriminatory (where the reward is contestant-dependent) contests. We derive conditions under which the designer obtains a larger payoff when using a discriminatory contest and describe settings where these conditions are satisfied.

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Paper provided by Barcelona Graduate School of Economics in its series Working Papers with number 654.

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Date of creation: Aug 2012
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Handle: RePEc:bge:wpaper:654
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  1. Konrad, Kai A., 2009. "Strategy and Dynamics in Contests," OUP Catalogue, Oxford University Press, number 9780199549603, July.
  2. Konrad, Kai A., 2001. "Investment in the absence of property rights: the role of incumbency advantages
    [Investitionsanreize bei unvollständigen Eigentumsrechten: die Rolle von Asymmetrien in Aneignungskonflikten]
    ," Discussion Papers, Research Unit: Market Processes and Governance FS IV 01-18, Social Science Research Center Berlin (WZB).
  3. Benny Moldovanu & Aner Sela, 2001. "The Optimal Allocation of Prizes in Contests," American Economic Review, American Economic Association, vol. 91(3), pages 542-558, June.
  4. Kaplan, Todd R. & Luski, Israel & Wettstein, David, 2003. "Innovative activity and sunk cost," International Journal of Industrial Organization, Elsevier, vol. 21(8), pages 1111-1133, October.
  5. Jönsson, Stefan & Schmutzler, Armin, 2013. "All-Pay Auctions: Implementation and Optimality," CEPR Discussion Papers 9323, C.E.P.R. Discussion Papers.
  6. Kovenock, D. & de Vries, C.G., 1995. "The All-Pay Auction with Complete Information," UFAE and IAE Working Papers 311.95, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  7. Amann, Erwin & Leininger, Wolfgang, 1996. "Asymmetric All-Pay Auctions with Incomplete Information: The Two-Player Case," Games and Economic Behavior, Elsevier, vol. 14(1), pages 1-18, May.
  8. 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.
  9. Baye, M.R. & Kovenock, D. & De Vries, C.G., 1991. "Rigging The Lobbying Process: An Application Of The All- Pay Auction," Purdue University Economics Working Papers 1002, Purdue University, Department of Economics.
  10. Kirkegaard, René, 2012. "Favoritism in asymmetric contests: Head starts and handicaps," Games and Economic Behavior, Elsevier, vol. 76(1), pages 226-248.
  11. Kirkegaard, René, 2013. "Handicaps in incomplete information all-pay auctions with a diverse set of bidders," European Economic Review, Elsevier, vol. 64(C), pages 98-110.
  12. Newell, Richard & Wilson, Nathan, 2005. "Technology Prizes for Climate Change Mitigation," Discussion Papers dp-05-33, Resources For the Future.
  13. Krishna, Vijay & Morgan, John, 1997. "An Analysis of the War of Attrition and the All-Pay Auction," Journal of Economic Theory, Elsevier, vol. 72(2), pages 343-362, February.
  14. Ron Siegel, 2010. "Asymmetric Contests with Conditional Investments," American Economic Review, American Economic Association, vol. 100(5), pages 2230-60, December.
  15. Steven D. Levitt, 1995. "Optimal Incentive Schemes When Only the Agents' "Best" Output Matters to the Principal," RAND Journal of Economics, The RAND Corporation, vol. 26(4), pages 744-760, Winter.
  16. Nirvikar Singh & Donald Wittman, 2001. "Contests where there is variation in the marginal productivity of effort," Economic Theory, Springer, vol. 18(3), pages 711-744.
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