Abstract

http://ssrn.com/abstract=2277215
 


 



Innovation Tournaments with Multiple Contributors


Laurence Ales


Carnegie Mellon University - David A. Tepper School of Business

Soo-Haeng Cho


Carnegie Mellon University - Tepper School of Business

Ersin Körpeoğlu


Carnegie Mellon University - David A. Tepper School of Business

July 29, 2014


Abstract:     
This paper studies an innovation tournament in which an organizer seeks solutions to an innovation-related problem from a number of independent agents. While agents exert efforts to improve their solutions, their outcomes are unknown a priori due to technical uncertainty and subjective taste of the organizer. We call an agent whose ex-post output contributes to the organizer's utility a contributor, and consider a general case in which the organizer seeks any number of contributors. We show that a winner-takes-all award scheme is optimal to the tournament organizer for a large class (but not all) of distributions for agents' uncertain outputs. In this case, when the spread of the output distribution or the number of contributors is sufficiently large, an open tournament that does not restrict entry of participants is optimal. Finally, we compare the organizer's payoffs under different compensation rules that award participants based on their relative ranks, absolute performance or a combination of both.

Number of Pages in PDF File: 46

Keywords: Contract, Incentive, Outsourcing, Technology, Uncertainty

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Date posted: June 12, 2013 ; Last revised: August 6, 2014

Suggested Citation

Ales, Laurence and Cho, Soo-Haeng and Körpeoğlu, Ersin, Innovation Tournaments with Multiple Contributors (July 29, 2014). Available at SSRN: http://ssrn.com/abstract=2277215 or http://dx.doi.org/10.2139/ssrn.2277215

Contact Information

Laurence Ales
Carnegie Mellon University - David A. Tepper School of Business ( email )
5000 Forbes Avenue
Pittsburgh, PA 15213-3890
United States
Soo-Haeng Cho (Contact Author)
Carnegie Mellon University - Tepper School of Business ( email )
Pittsburgh, PA 15213-3890
United States
HOME PAGE: http://public.tepper.cmu.edu/facultydirectory/FacultyDirectoryProfile.aspx?id=290
Ersin Körpeoğlu
Carnegie Mellon University - David A. Tepper School of Business ( email )
5000 Forbes Avenue
Pittsburgh, PA 15213-3890
United States
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