Innovation Contests

47 Pages Posted: 16 Apr 2014

See all articles by David Pérez-Castrillo

David Pérez-Castrillo

Universidad Autonoma de Barcelona; CESifo (Center for Economic Studies and Ifo Institute)

David Wettstein

Ben-Gurion University of the Negev

Date Written: March 16, 2014

Abstract

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.

Keywords: contests, auctions, innovation, discrimination

JEL Classification: O310, D440, J710

Suggested Citation

Pérez-Castrillo, David and Wettstein, David, Innovation Contests (March 16, 2014). CESifo Working Paper Series No. 4712, Available at SSRN: https://ssrn.com/abstract=2425517

David Pérez-Castrillo

Universidad Autonoma de Barcelona ( email )

Edifici B - Campus Bellaterra
Barcelona, 08193
Spain
(34 93) 381 1405 (Phone)
(34 93) 581 2012 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

David Wettstein (Contact Author)

Ben-Gurion University of the Negev ( email )

Economics Department
Beer-Sheva 84105
Israel

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