Coupling Information Disclosure with a Quality Standard in R&D Contests

Gaoyang Cai, Qian Jiao, Jingfeng Lu and Jie Zheng

Journal of Industrial Economics, 2024, vol. 72, issue 3, 1299-1337

Abstract: We study two‐player R&D contest design using both an information disclosure policy and a quality standard as instruments. The ability of an innovator is known only to himself. The organizer commits ex‐ante to a minimum quality standard and whether to have innovators' abilities publicly revealed before they conduct R&D activities. We find that without quality standards, fully concealing innovators' abilities elicits both higher expected aggregate quality and expected highest quality. With optimally set quality standards, although fully concealing ability information still elicits higher expected aggregate quality, fully disclosing this information leads to a higher level of expected highest quality. Moreover, the optimal quality standards are compared across different objectives and disclosure policies.

Date: 2024
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