Prizes and Lemons: Procurement of Innovation under Imperfect Commitment

Arbeitspapier

The literature on R&D contests implicitly assumes that contestants submit their innovation regardless of its value. This ignores a potential adverse selection problem. The present paper analyzes the procurement of innovations when the procurer cannot commit to never bargain with innovators who bypass the contest. We compare ?xed-prize tournaments with and without entry fees, and optimal scoring auctions with and without minimum score requirement. Our main result is that the optimal ?xed-prize tournament is more pro?table than the optimal auction since preventing bypass is more costly in the optimal auction.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: SFB/TR 15 Discussion Paper ; No. 262

Classification and Topics

• Classification: Wirtschaft
• Subject: innovation ; contests ; tournaments ; auctions ; bargaining ; adverse ; Innovationswettbewerb ; Extensives Spiel ; Auktionstheorie ; Innovation ; Beschaffung ; Verhandlungstheorie ; Adverse Selektion ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Ding, Wei ; Wolfstetter, Elmar G.
• Event: Veröffentlichung
• (who): Sonderforschungsbereich/Transregio 15 - Governance and the Efficiency of Economic Systems (GESY)
• (where): München
• (when): 2009

Further information

• DOI: doi:10.5282/ubm/epub.13290
• Handle: http://hdl.handle.net/10419/93822
• URN: urn:nbn:de:bvb:19-epub-13290-4
• Last update: 10.03.2025, 11:43 AM CET