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Procuring New Ideas: On the Value of Performance Information in Innovation Tournaments

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  • Martina Bossard, Marc Möller, Catherine Roux

Abstract

We use a stylized model of a dynamic innovation tournament to show that the effectiveness of monetary incentives depends on whether contestants receive cardinal, ordinal, or no information about their rival’s performance. The model’s main implication is that performance information acts as a substitute for prize money in creating incentives to invest in new ideas: The investment-maximizing information policy switches from no to ordinal to cardinal information as the tournament’s prize is reduced. A laboratory experiment provides support for our theory but also unveils an unpredicted pattern of behavior capable of overturning the model’s conclusions concerning optimal policy.

Suggested Citation

  • Martina Bossard, Marc Möller, Catherine Roux, 2026. "Procuring New Ideas: On the Value of Performance Information in Innovation Tournaments," Diskussionsschriften dp2602, Universitaet Bern, Departement Volkswirtschaft.
    • Handle: RePEc:ube:dpvwib:dp2602
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    Keywords

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    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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