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Designing dynamic research contests


Benkert, Jean-Michel; Letina, Igor (2016). Designing dynamic research contests. Working paper series / Department of Economics 235, University of Zurich.

Abstract

This paper considers the optimal design of dynamic research contests when the buyer can set time-dependent prizes. We derive the buyer-optimal contest and show that it entails an increasing prize schedule. Remarkably, this allows the buyer to implement a global stopping rule. In particular, the optimal contest attains the first-best. More generally, we show that global stopping rules can be implemented robustly and compare them to individual stopping rules which have been analyzed in the existing literature. We conclude by discussing policy implications of our findings and highlight that global stopping rules combine the best aspects of innovation races and research tournaments.

Abstract

This paper considers the optimal design of dynamic research contests when the buyer can set time-dependent prizes. We derive the buyer-optimal contest and show that it entails an increasing prize schedule. Remarkably, this allows the buyer to implement a global stopping rule. In particular, the optimal contest attains the first-best. More generally, we show that global stopping rules can be implemented robustly and compare them to individual stopping rules which have been analyzed in the existing literature. We conclude by discussing policy implications of our findings and highlight that global stopping rules combine the best aspects of innovation races and research tournaments.

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Additional indexing

Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Economics
Working Paper Series > Department of Economics
Dewey Decimal Classification:330 Economics
JEL Classification:O32, D02, L19
Uncontrolled Keywords:Innovation, contests, dynamic tournaments, global stopping rule, breakthroughs, R&D
Language:English
Date:September 2016
Deposited On:27 Sep 2016 09:28
Last Modified:29 Aug 2017 10:15
Series Name:Working paper series / Department of Economics
Number of Pages:40
ISSN:1664-7041
Official URL:http://www.econ.uzh.ch/static/wp/econwp235.pdf
Related URLs:http://www.econ.uzh.ch/static/workingpapers.php

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