IDEAS home Printed from https://ideas.repec.org/a/eee/mateco/v111y2024ics0304406824000193.html
   My bibliography  Save this article

Innovation through competitive experimentation

Author

Listed:
  • Achim, Peter

Abstract

This paper studies optimal contest design for competitive experimentation. A principal wants to implement a project and seeks contributions from multiple agents that increase the value of the project. The agent’s chances of success are independent and their experimentation efforts are unobservable. To induce effort, the principal offers a mechanism that specifies rewards and a termination time which depend on the history of past contributions. I characterize the optimal contest and show that the principal limits the agents’ rent by setting inefficiently tight stopping thresholds.

Suggested Citation

  • Achim, Peter, 2024. "Innovation through competitive experimentation," Journal of Mathematical Economics, Elsevier, vol. 111(C).
    • Handle: RePEc:eee:mateco:v:111:y:2024:i:c:s0304406824000193
    DOI: 10.1016/j.jmateco.2024.102957
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0304406824000193
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jmateco.2024.102957?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Benny Moldovanu & Aner Sela, 2008. "The Optimal Allocation of Prizes in Contests," Springer Books, in: Roger D. Congleton & Arye L. Hillman & Kai A. Konrad (ed.), 40 Years of Research on Rent Seeking 1, pages 615-631, Springer.
    2. , & ,, 2012. "A principal-agent model of sequential testing," Theoretical Economics, Econometric Society, vol. 7(3), September.
    3. Johannes Hörner & Larry Samuelson, 2013. "Incentives for experimenting agents," RAND Journal of Economics, RAND Corporation, vol. 44(4), pages 632-663, December.
    4. Godfrey Keller & Sven Rady & Martin Cripps, 2005. "Strategic Experimentation with Exponential Bandits," Econometrica, Econometric Society, vol. 73(1), pages 39-68, January.
    5. Yeon-Koo Che & Ian Gale, 2003. "Optimal Design of Research Contests," American Economic Review, American Economic Association, vol. 93(3), pages 646-671, June.
    6. repec:cwl:cwldpp:1726rrr is not listed on IDEAS
    7. repec:cwl:cwldpp:1726rr is not listed on IDEAS
    8. Marina Halac & Navin Kartik & Qingmin Liu, 2017. "Contests for Experimentation," Journal of Political Economy, University of Chicago Press, vol. 125(5), pages 1523-1569.
    9. Moroni, Sofia, 2022. "Experimentation in Organizations," Theoretical Economics, Econometric Society, vol. 17(3), July.
    10. Marina Halac & Navin Kartik & Qingmin Liu, 2016. "Optimal Contracts for Experimentation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 83(3), pages 1040-1091.
    11. Kostas Bimpikis & Shayan Ehsani & Mohamed Mostagir, 2019. "Designing Dynamic Contests," Operations Research, INFORMS, vol. 67(2), pages 339-356, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Rodivilov, Alexander, 2022. "Monitoring innovation," Games and Economic Behavior, Elsevier, vol. 135(C), pages 297-326.
    2. Khalil, Fahad & Lawarree, Jacques & Rodivilov, Alexander, 2020. "Learning from failures: Optimal contracts for experimentation and production," Journal of Economic Theory, Elsevier, vol. 190(C).
    3. Stanton Hudja & Daniel Woods, 2024. "Exploration versus exploitation: A laboratory test of the single‐agent exponential bandit model," Economic Inquiry, Western Economic Association International, vol. 62(1), pages 267-286, January.
    4. Catherine Bobtcheff & Raphaël Levy, 2017. "More Haste, Less Speed? Signaling through Investment Timing," American Economic Journal: Microeconomics, American Economic Association, vol. 9(3), pages 148-186, August.
    5. Sadler, Evan, 2021. "Dead ends," Journal of Economic Theory, Elsevier, vol. 191(C).
    6. Ming Hu & Lu Wang, 2021. "Joint vs. Separate Crowdsourcing Contests," Management Science, INFORMS, vol. 67(5), pages 2711-2728, May.
    7. Chen, Chia-Hui & Ishida, Junichiro, 2018. "Hierarchical experimentation," Journal of Economic Theory, Elsevier, vol. 177(C), pages 365-404.
    8. Jürgen Mihm & Jochen Schlapp, 2019. "Sourcing Innovation: On Feedback in Contests," Management Science, INFORMS, vol. 65(2), pages 559-576, February.
    9. Jin Hyuk Choi & Kookyoung Han, 2023. "Delegation of information acquisition, information asymmetry, and outside option," International Journal of Game Theory, Springer;Game Theory Society, vol. 52(3), pages 833-860, September.
    10. Heidhues, Paul & Rady, Sven & Strack, Philipp, 2015. "Strategic experimentation with private payoffs," Journal of Economic Theory, Elsevier, vol. 159(PA), pages 531-551.
    11. Pin Gao & Xiaoshuai Fan & Yangguang Huang & Ying-Ju Chen, 2022. "Resource Allocation Among Competing Innovators," Management Science, INFORMS, vol. 68(8), pages 6059-6074, August.
    12. Dmitry Ryvkin, 2022. "To Fight or to Give Up? Dynamic Contests with a Deadline," Management Science, INFORMS, vol. 68(11), pages 8144-8165, November.
    13. Christoph Carnehl & Marco Ottaviani & Justus Preusser, 2024. "Designing Scientific Grants," Papers 2410.12356, arXiv.org.
    14. Mira Frick & Yuhta Ishii, 2015. "Innovation Adoption by Forward-Looking Social Learners," Cowles Foundation Discussion Papers 1877, Cowles Foundation for Research in Economics, Yale University.
    15. Chia-Hui Chen & Junichiro Ishida, 2015. "A Tenure-Clock Problem," ISER Discussion Paper 0919, Institute of Social and Economic Research, Osaka University.
    16. Wei Zhang & Long Gao & Mohammad Zolghadr & Dawei Jian & Mohsen ElHafsi, 2023. "Dynamic incentives for sustainable contract farming," Production and Operations Management, Production and Operations Management Society, vol. 32(7), pages 2049-2067, July.
    17. Kostas Bimpikis & Shayan Ehsani & Mohamed Mostagir, 2019. "Designing Dynamic Contests," Operations Research, INFORMS, vol. 67(2), pages 339-356, March.
    18. Alessandro Spiganti, 2020. "Can Starving Start‐ups Beat Fat Labs? A Bandit Model of Innovation with Endogenous Financing Constraint," Scandinavian Journal of Economics, Wiley Blackwell, vol. 122(2), pages 702-731, April.
    19. Swagata Bhattacharjee, 2019. "Dynamic Contracting for Innovation Under Ambiguity," Working Papers 1022, Ashoka University, Department of Economics, revised Aug 2019.
    20. Gomes, Renato & Gottlieb, Daniel & Maestri, Lucas, 2016. "Experimentation and project selection: Screening and learning," Games and Economic Behavior, Elsevier, vol. 96(C), pages 145-169.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:mateco:v:111:y:2024:i:c:s0304406824000193. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/jmateco .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.