Digging for Golden Carrots: An Analysis of Research Tournaments
Abstract
Contracting for research is often infeasible because research inputs are unobservable
and research outcomes cannot be verified by a court. Sponsoring a research tournament
can resolve these problems. A model is presented in which contestants compete to find
the innovation of highest value to the tournament sponsor. The winner receives a prespecified
prize. The tournament game has a unique subgame-perfect equilibrium. Free entry is
not optimal because equilibrium effort by each researcher decreases in the number
of contestants. An optimally designed research tournament balances the probability
of overshooting the first-best quality level against the probability of falling short.
Copyright 1995 by American Economic Association.
Type
Journal articleSubject
Golden Carrot ContestPermalink
https://hdl.handle.net/10161/1857Collections
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Curtis R. Taylor
Professor of Economics
Taylor's primary research interest is microeconomic theory with emphasis on the areas
of Industrial Organization, Political Economy, and the Theory of Contracts. He has
worked on a variety of topics such as: the optimal design of research contests, the
causes and timing of market crashes, and consumer privacy. Professor Taylor's research
has been supported by grants from the National
Science Foundation, the U.S. Department of Agriculture, and the Texas Higher Education
Coordinating Board, am
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