Dynamic Development Contests

Abstract

How to Optimally Design Contests in Development Settings for Rapid and Efficient Results: Firms increasingly leverage their expert suppliers to develop innovative products and services while minimizing both time-to-market and expenses. In “Dynamic Development Contests,” Sina Khorasani, Ersin Korpeoglu, and Vish Krishnan study how companies can effectively organize contests to stimulate development efforts from competing suppliers to minimize project lead times while keeping the cost of incentives in check. Their characterization of the optimal designs reveals that flexible rewards are most effective when funds are sufficient. However, in cases where resources are constrained, strategic information disclosure in the form of probabilistic disclosure of any change in the state of competition serves as a valuable incentive instrument that helps contest organizers achieve their lead-time minimization objectives.