An Empirical Model of R&D Procurement Contests : An Analysis of the DOD SBIR Program
Firms and governments often use R&D contests to incentivize suppliers to develop and deliver innovative products. The optimal design of such contests depends on empirical primitives: the cost of research, the uncertainty in outcomes, and the surplus participants capture. Can R&D contests in real‐world settings be redesigned to increase social surplus? I ask this question in the context of the Department of Defense's Small Business Innovation Research program, a multistage R&D contest. I develop a structural model to estimate the primitives from data on R&D and procurement contracts. I find that the optimal design substantially increases social surplus, and simple design changes in isolation (e.g., inviting more contestants) can capture up to half these gains; however, these changes reduce the DOD's own welfare. These results suggest there is substantial scope for improving the design of real‐world contests but that a designer must balance competing objectives.
Year of publication: |
2021
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Authors: | Bhattacharya, Vivek |
Published in: |
Econometrica. - The Econometric Society, ISSN 0012-9682, ZDB-ID 1477253-X. - Vol. 89.2021, 5, p. 2189-2224
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Publisher: |
The Econometric Society |
Saved in:
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