Experimental evidence on the effects of innovation contests

Date: 2015
By: Brueggemann, Julia
Meub, Lukas
URL: http://d.repec.org/n?u=RePEc:zbw:cegedp:251&r=net
Economic research on innovation has long discussed which policy instruments best foster innovativeness in individuals and organizations. One of the instruments easily accessible to policy-makers is innovation contests; however, there is ambiguous empirical evidence concerning how such contests should be designed. Our experimental study provides evidence by analyzing the effects of two different innovation contests on subjects´ innovativeness: a prize for the aggregate innovativeness and a prize for the best innovation. We implement a creative real effort task simulating a sequential innovation process, whereby subjects determine royalty fees for their created products, which also serve as a measure of cooperation. We find that both contest conditions reduce the willingness to cooperate between subjects compared to a benchmark condition without an innovation contest. However, the total innovation activity is not influenced by introducing innovation contest schemes. From a policy perspective, the implementation of state-subsidized innovation contests in addition to the existing intellectual property rights system should be questioned.
Keywords: innovation prizes,competition,laboratory experiment,real effort task,creativity,innovation policy
JEL: C91 D89 O31

Endogenous housing market cycles

Sommervoll, Dag Einar, Trond-Arne Borgersen, and Tom Wennemo. “Endogenous housing market cycles." Journal of banking & finance 34.3 (2010): 557-567.


Housing markets tend to display positive serial correlation as well as considerable volatility over time. We present a heterogeneous agent model illustrating the connection between adaptive expectations and housing market fluctuations. A dwelling serves as a shelter, as a vehicle for investment and as mortgage collateral. Interesting dynamics arise as the valuation of these three properties changes over time through the interaction of buyers, sellers and mortgagees. In the absence of credit constraints imposed by mortgagees, house prices oscillate mildly around the equilibrium price. However, credit constraints imposed by mortgagees can affect market dynamics quite dramatically with periods of mild oscillations interrupted by violent collapses. This chaotic behavior arises even though buyers, sellers and mortgagees agree on market forecasts.

Information, Learning and Expectations in an Experimental Model Economy

Roos, Michael WM, and Wolfgang J. Luhan. “Information, learning and expectations in an experimental model economy." Economica 80.319 (2013): 513-531.
source: http://onlinelibrary.wiley.com/doi/10.1111/ecca.12003/full


The experimental ‘learning-to-forecast’ literature finds that subjects use simple linear backward-looking models when forecasting in environments with little to no inout the economic framework. We study the formation of expectations in a laboratory economy of monopolistic firms and labour unions with almost complete knowledge of the model. We observe simple backward-looking rules, but also a considerable share of model-based expectations using information on the economic structure. At least for some subjects, expectations are informed by theory. As in the previous literature, we find individual prediction rules to be heterogeneous.

Selling to the Newsvendor: An Analysis of Price-Only Contracts

Lariviere, Martin A., and Evan L. Porteus. “Selling to the newsvendor: An analysis of price-only contracts." Manufacturing & service operations management 3.4 (2001): 293-305.


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==original Abstract==

We consider a simple supply-chain contract in which a manufacturer sells to a retailer facing a newsvendor problem and the lone contract parameter is a wholesale price. We develop a mild restriction satisfied by many common distributions that assures that the manufacturer’s problem is readily amenable to analysis. The manufacturer’s profit and sales quantity increase with market size, but the resulting wholesale price depends on how the market grows. For the cases we consider, we identify relative variability (i.e., the coefficient of variation) as key: As relative variability decreases, the retailer’s price sensitivity decreases, the wholesale price increases, the decentralized system becomes more efficient (i.e., captures a greater share of potential profit), and the manufacturer’s share of realized profit increases. Decreasing relative variability, however, may leave the retailer severely disadvantaged as the higher wholesale price reduces his profitability. We explore factors that may lead the manufacturer to set a wholesale price below that which would maximize her profit, concentrating on retailer participation in forecasting and retailer power. As these and other considerations can result in a wholesale price below what we initially suggest, our base model represents a worst-case analysis of supply-chain performance.