Designing Dynamic Contests

Kostas Bimpikis (), Shayan Ehsani () and Mohamed Mostagir ()
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Kostas Bimpikis: Graduate School of Business, Stanford University, Stanford, California 94305;
Shayan Ehsani: Department of Management Science and Engineering, Stanford University, Stanford, California 94305;
Mohamed Mostagir: Ross School of Business, University of Michigan, Ann Arbor, Michigan 48109

Operations Research, 2019, vol. 67, issue 2, 339-356

Abstract: Participants race toward completing an innovation project and learn about its feasibility from their own efforts and their competitors’ gradual progress. Information about the status of competition can alleviate some of the uncertainty inherent in the contest, but it can also adversely affect effort provision from the laggards. This paper explores the problem of designing the award structure of a contest and its information disclosure policy in a dynamic framework and provides a number of guidelines for maximizing the designer’s expected payoff. In particular, we show that the probability of obtaining the innovation as well as the time it takes to complete the project are largely affected by when and what information the designer chooses to disclose. Furthermore, we establish that intermediate awards may be used by the designer to appropriately disseminate information about the status of competition. Interestingly, our proposed design matches several features observed in real-world innovation contests.

Keywords: contests; learning; dynamic competition; open innovation; information (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (24)

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