Exclusive or Not? An Experimental Analysis of Parallel Innovation Contests

36 Pages Posted: 28 Oct 2022 Last revised: 8 Nov 2023

See all articles by Ramazan Kizilyildirim

Ramazan Kizilyildirim

School of Management, University College London

C. Gizem Korpeoglu

Eindhoven University of Technology

Ersin Körpeoğlu

University College London - School of Management

Mirko Kremer

Frankfurt School of Finance & Management

Date Written: October 23, 2022

Abstract

Problem definition: We study parallel innovation contests where organizers seek innovative solutions to a set of problems from independent solvers with limited (financial, time, cognitive) resources. We analyze whether (and when) organizers should discourage solvers from participating in more than one contest.
Methodology/results: We test contest theory based on a game-theoretic model using controlled laboratory experiments. In the model, a solver’s likelihood of winning a contest is determined by the quality of her solution, which improves with her effort and is also influenced by some output uncertainty. Prior theoretical work suggests that organizers should discourage solvers from participating in parallel contests in environments with low output uncertainty, where contest outcomes are primarily driven by solver efforts. In this case, organizers benefit from solvers focusing all of their efforts on a single “exclusive” contest rather than splitting their efforts across multiple “non-exclusive” contests. Our experimental findings depart from theoretical predictions in terms of both solvers’ effort choices and the relative profitability of different contest formats.
Managerial implications: Our main result (and key managerial insight) is that non-exclusive contests are attractive to organizers even in environments with low output uncertainty where theory advocates exclusive contests. We link this result to behavioral tendencies that affect both the average and variability of solvers’ efforts in ways that favor non-exclusive contests over exclusive ones.

Keywords: Behavioral Operations, Crowdsourcing, Innovation Management, Quantal Response Equilibrium

Suggested Citation

Kizilyildirim, Ramazan and Korpeoglu, C. Gizem and Körpeoğlu, Ersin and Kremer, Mirko, Exclusive or Not? An Experimental Analysis of Parallel Innovation Contests (October 23, 2022). Available at SSRN: https://ssrn.com/abstract=4256134 or http://dx.doi.org/10.2139/ssrn.4256134

Ramazan Kizilyildirim (Contact Author)

School of Management, University College London ( email )

London, E14 5AA
United Kingdom

C. Gizem Korpeoglu

Eindhoven University of Technology ( email )

PO Box 513
Eindhoven, 5600 MB
Netherlands

Ersin Körpeoğlu

University College London - School of Management ( email )

1 Canada Square Canary Wharf
London, E14 5AA
United Kingdom

Mirko Kremer

Frankfurt School of Finance & Management ( email )

Adickesallee 32-34
Frankfurt am Main, 60322
Germany

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