Ersin Korpeoglu, Tepper School of Business - Carnegie Mellon University
Thursday, 15 January 2015
15:00 – 16:30
BR3, 1 Alfred Place, London WC1E 7EB
This paper studies an innovation contest in which an organiser seeks solutions to an innovation related problem from a number on independent agents. While agents exert efforts to improve their solutions, their outcomes are unknown a priori due to technical uncertainty and subjective taste of the organiser. We call an agent whose ex-post output contributes to the organiser’s utility a contributor and consider a general case in which the organiser seeks any number of contributors. We show that a winner-takes-all awards scheme is optimal to the contest orgainser for a large class (but not all) of distributions for agents’ uncertain outputs. In this case, when the spread of the output distribution or the number of contributors is sufficiently large, an open contest that does not restrict entry of participants is optimal. Finally, we compare the organiser’s payoffs under different compensation rules that award participants based on their relative ranks, absolute performance or a combination of both.
Executive Education: Project Management
Last updated Tuesday, 13 January 2015