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Innovation contests with entry auction
TU Berlin, Germany.ORCID iD: 0000-0002-8973-1410
2014 (English)In: Journal of Mathematical Economics, ISSN 0304-4068, E-ISSN 1873-1538, Vol. 55, p. 165-176Article in journal (Refereed) Published
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Abstract [en]

We consider innovation contests for the procurement of an innovation under moral hazard and adverse selection. Innovators have private information about their abilities, and choose unobservable effort in order to produce innovations of random quality. Innovation quality is not contractible. We compare two procurement mechanisms—a fixed prize and a first-price auction. Before the contest, a fixed number of innovators is selected in an entry auction, in order to address the adverse selection problem. We find that–if effort and ability are perfect substitutes–both mechanisms implement the same innovations in symmetric pure-strategy equilibrium, regardless of whether the innovators’ private information is revealed or not. These equilibria are efficient if the procurer is a welfare-maximizer.

Place, publisher, year, edition, pages
Elsevier, 2014. Vol. 55, p. 165-176
Keywords [en]
Procurement, Contest, Auction, Innovation, Research, Tournament
National Category
Economics
Research subject
Economy, Economics
Identifiers
URN: urn:nbn:se:lnu:diva-49431DOI: 10.1016/j.jmateco.2014.02.004OAI: oai:DiVA.org:lnu-49431DiVA, id: diva2:898845
Available from: 2016-01-29 Created: 2016-01-29 Last updated: 2017-11-30Bibliographically approved

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Giebe, Thomas

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  • apa
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  • nn-NB
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  • Other locale
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Output format
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  • asciidoc
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