Fixed-prize tournaments versus first-price auctions in innovation contests |
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Authors: | Anja Schöttner |
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Institution: | (1) Humboldt University at Berlin, Ziegelstr. 13a, 10099 Berlin, Germany |
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Abstract: | This paper analyzes a procurement setting with identical firms and stochastic innovations. In contrast to the previous literature,
I show that a procurer who cannot charge entry fees may prefer a fixed-prize tournament to a first-price auction. The reason
is that holding an auction may leave higher rents to firms when the innovation technology is subject to large random factors.
I would like to thank Dominique Demougin and Carsten Helm for helpful comments and discussions. Financial support by the Deutsche
Forschungsgemeinschaft through the SFB 649 “Economic Risk” is gratefully acknowledged. |
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Keywords: | Innovation contest Auction Tournament Quality |
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