Inducing variety: a theory of innovation contests

Igor Letina and Armin Schmutzler

No 200, ECON - Working Papers from Department of Economics - University of Zurich

Abstract: This paper analyzes the design of innovation contests when the quality of an innovation depends on the research approach, but the best approach is unknown. Inducing a variety of research approaches generates an option value. We show that suitable contests can induce such variety. The buyer-optimal contest is a bonus tournament, where suppliers can choose only between a low bid and a high bid. This contest implements the socially optimal variety for a suitable parameter range. Finally, we compare the optimal contest to scoring auctions and fixed-prize tournaments.

Keywords: Contests; tournaments; auctions; diversity; innovation; procurement (search for similar items in EconPapers)
JEL-codes: L14 L22 L23 (search for similar items in EconPapers)
Date: 2015-07, Revised 2019-02
New Economics Papers: this item is included in nep-ino and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://www.zora.uzh.ch/id/eprint/111830/18/econwp200.pdf (application/pdf)

Related works:
Journal Article: INDUCING VARIETY: A THEORY OF INNOVATION CONTESTS (2019)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zur:econwp:200

Access Statistics for this paper

More papers in ECON - Working Papers from Department of Economics - University of Zurich Contact information at EDIRC.
Bibliographic data for series maintained by Severin Oswald ().