Procuring New Ideas: On the Value of Performance Information in Innovation Tournaments

Martina Bossard, Marc Möller, Catherine Roux

Diskussionsschriften from Universitaet Bern, Departement Volkswirtschaft

Abstract: We use a stylized model of a dynamic innovation tournament to show that the effectiveness of monetary incentives depends on whether contestants receive cardinal, ordinal, or no information about their rival’s performance. The model’s main implication is that performance information acts as a substitute for prize money in creating incentives to invest in new ideas: The investment-maximizing information policy switches from no to ordinal to cardinal information as the tournament’s prize is reduced. A laboratory experiment provides support for our theory but also unveils an unpredicted pattern of behavior capable of overturning the model’s conclusions concerning optimal policy.

Keywords: Innovation Tournaments; Performance Information; Rank Information; R&D Investment. (search for similar items in EconPapers)
JEL-codes: C72 D83 O31 (search for similar items in EconPapers)
Date: 2026-03
New Economics Papers: this item is included in nep-des and nep-sbm
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