Prizes and lemons: procurement of innovation under imperfect commitment
The literature on research and development contests implicitly assumes that contestants submit their innovation regardless of its value. This ignores a potential adverse selection problem. The present article analyzes the procurement of innovations when the procurer cannot commit himself to never ba...
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| Veröffentlicht in: | The Rand journal of economics 2011-12, Vol.42 (4), p.664-680 |
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| container_end_page | 680 |
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| container_title | The Rand journal of economics |
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| creator | Ding, Wei Wolfstetter, Elmar G. |
| description | The literature on research and development contests implicitly assumes that contestants submit their innovation regardless of its value. This ignores a potential adverse selection problem. The present article analyzes the procurement of innovations when the procurer cannot commit himself to never bargain with innovators who bypass the contest. We compare fixed-prize tournaments with and without entry fees, and optimal scoring auctions with and without minimum score requirement. Our main result is that preventing bypass is more costly in the optimal auction, and the optimal fixed-prize tournament is more profitable than the optimal auction. |
| doi_str_mv | 10.1111/j.1756-2171.2011.00149.x |
| format | Article |
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| source | RePEc; Business Source Complete; JSTOR Archive Collection A-Z Listing; Wiley Online Library All Journals |
| subjects | Auctions Bargaining Bidding Commitments Comparative analysis Contests Corporate purchasing Fees Game theory Games Imperfect competition Innovation Innovations Procurement Product innovation R&D Research & development Studies Surplus Technological innovation Tournaments & championships World Bank |
| title | Prizes and lemons: procurement of innovation under imperfect commitment |
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