Prizes and lemons: procurement of innovation under imperfect commitment

• 成果类型: Article
• 署名作者: Ding, Wei; Wolfstetter, Elmar G.
• 署名单位: University of Bonn; Korea University
• 刊物名称: RAND JOURNAL OF ECONOMICS
• ISSN/ISSBN: 0741-6261
• DOI: 10.1111/j.1756-2171.2011.00149.x
• 发表日期: 2011
• 页码: 664-680
• 关键词: probability; auctions

摘要

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