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Diversification and Information in Contests

Author

Listed:
  • Jorge Lemus

    (University of Illinois Urbana-Champaign)

  • Emil Temnyalov

    (University of Technology Sydney)

Abstract

We study information disclosure and diversification in contests with techno- logical uncertainty�where agents can pursue different technologies to compete in the contest, but there is uncertainty regarding which is the right one. The principal can credibly reveal information about the technologies to affect the agents� choices. Information revelation may prompt agents to work on the right technology, which is valuable for the principal, but it can also reduce technological diversification, which may be detrimental for the principal in a setting with technological uncertainty. We characterize the optimal information disclosure policy and show that it can be maximally or partially revealing, or completely uninformative, depending on: (i) the value of diversification; (ii) the quality of the principal�s information; and (iii) the extent of technological uncertainty. Our results apply to various managerial settings such as innovation contests, tournaments within organizations, and procurement.

Suggested Citation

  • Jorge Lemus & Emil Temnyalov, 2019. "Diversification and Information in Contests," Working Paper Series 2019/12, Economics Discipline Group, UTS Business School, University of Technology, Sydney.
    • Handle: RePEc:uts:ecowps:2019/12
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    File URL: https://www.uts.edu.au/sites/default/files/2020-07/Diversification%20final%20workign%20paper%20to%20save.pdf
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    Citations

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    Cited by:

    1. Letina, Igor & Liu, Shuo & Netzer, Nick, 2023. "Optimal contest design: Tuning the heat," Journal of Economic Theory, Elsevier, vol. 213(C).
    2. Christoph Carnehl & Johannes Schneider, 2021. "On Risk and Time Pressure: When to Think and When to Do," Papers 2111.07451, arXiv.org, revised Mar 2022.

    More about this item

    Keywords

    information disclosure; contests; variety; diversification;
    All these keywords.

    JEL classification:

    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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