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Journal Article
Designing Dynamic Contests
2019
Overview
Firms and institutions increasingly employ
contests
as a way to innovate. Participants learn from one another’s successes and failures while competing for the contest’s awards. In “Designing Dynamic Contests,” Bimpikis, Ehsani, and Mostagir provide a number of design guidelines that focus on the contest’s information-disclosure policy. Critically, their analysis highlights that, when agents compete and learn from one another dynamically, the success of the contest largely relies on
when
and
what
information the designer chooses to disclose about their relative progress toward the end goal.
Participants race toward completing an innovation project and learn about its feasibility from their own efforts and their competitors’ gradual progress. Information about the status of competition can alleviate some of the uncertainty inherent in the contest, but it can also adversely affect effort provision from the laggards. This paper explores the problem of designing the award structure of a contest and its information disclosure policy in a dynamic framework and provides a number of guidelines for maximizing the designer’s expected payoff. In particular, we show that the probability of obtaining the innovation as well as the time it takes to complete the project are largely affected by
when
and
what
information the designer chooses to disclose. Furthermore, we establish that intermediate awards may be used by the designer to appropriately disseminate information about the status of competition. Interestingly, our proposed design matches several features observed in real-world innovation contests.
The e-companion is available at
https://doi.org/10.1287/opre.2018.1823
.
Publisher
INFORMS,Institute for Operations Research and the Management Sciences
