Diversification and Information in Contests

Jorge Lemus and Emil Temnyalov

No 2019/12, Working Paper Series from Economics Discipline Group, UTS Business School, University of Technology, Sydney

Abstract: We study information disclosure and diversification in contests with techno- logical uncertainty�where agents can pursue different technologies to compete in the contest, but there is uncertainty regarding which is the right one. The principal can credibly reveal information about the technologies to affect the agents� choices. Information revelation may prompt agents to work on the right technology, which is valuable for the principal, but it can also reduce technological diversification, which may be detrimental for the principal in a setting with technological uncertainty. We characterize the optimal information disclosure policy and show that it can be maximally or partially revealing, or completely uninformative, depending on: (i) the value of diversification; (ii) the quality of the principal�s information; and (iii) the extent of technological uncertainty. Our results apply to various managerial settings such as innovation contests, tournaments within organizations, and procurement.

Keywords: information disclosure; contests; variety; diversification (search for similar items in EconPapers)
JEL-codes: C72 D62 D72 D83 O32 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2019-07-01
New Economics Papers: this item is included in nep-mic and nep-ore
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Citations: View citations in EconPapers (2)

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Journal Article: Diversification and information in contests (2024)
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