Incentives in Contests with Heterogeneous Solvers

Ersin Körpeoğlu () and Soo-Haeng Cho ()
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Ersin Körpeoğlu: School of Management, University College London, London E14 5AB, United Kingdom
Soo-Haeng Cho: Tepper School of Business, Carnegie Mellon University, Pittsburgh, Pennsylvania 15213

Management Science, 2018, vol. 64, issue 6, 2709-2715

Abstract: In a contest in which solvers with heterogeneous expertise exert effort to develop solutions, a recent paper [Terwiesch C, Xu Y (2008) Innovation contests, open innovation, and multiagent problem solving. Management Sci. 54(9):1529–1543] argues that as more solvers enter the contest, every solver will reduce effort due to a lower probability of winning the contest. This paper corrects mistakes in this theory, and shows that there exist high-expertise solvers who may raise their effort in response to increased competition. This is because more entrants raise the expected best performance among other solvers, creating positive incentives for solvers to exert higher effort to win the contest. Because of this positive effect, we find that a free-entry open contest is more likely to be optimal to a contest organizer than what Terwiesch and Xu (2008) and other prior literature asserted.

Keywords: contract; crowdsourcing; incentive; tournament (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

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