Kaplan, Todd; Wettstein, David - Department of Economics, University of Haifa
Using contests to generate innovation has and is widely used. Such contests often involve offering a prize that depends … inducing innovation. In a symmetric environment, we find that the reward should be set to c(x)/c′(x) where c is the cost of … producing an innovation of level x. In an asymmetric environment with two firms, we find that it is optimal to set different …