Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/195170 
Year of Publication: 
2019
Series/Report no.: 
Working Paper No. 200
Version Description: 
Revised version, February 2019
Publisher: 
University of Zurich, Department of Economics, Zurich
Abstract: 
This paper analyzes the design of innovation contests when the quality of an innovation depends on the research approach, but the best approach is unknown. Inducing a variety of research approaches generates an option value. We show that suitable contests can induce such variety. The buyer-optimal contest is a bonus tournament, where suppliers can choose only between a low bid and a high bid. This contest implements the socially optimal variety for a suitable parameter range. Finally, we compare the optimal contest to scoring auctions and fixed-prize tournaments.
Subjects: 
contests
tournaments
auctions
diversity
innovation
procurement
JEL: 
L14
L22
L23
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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