Dynamic Competition

Participants race towards completing an innovation project and learn about its feasibility from their own efforts and their competitors’ gradual progress. Information about the status of competition can alleviate some of the uncertainty inherent in the contest, but it can also adversely affect effort provision from the laggards. We show that the probability of obtaining the innovation as well as the time it takes to complete the project are largely affected by when and what information the designer chooses to disclose. We establish that intermediate awards may be used by the designer to disseminate information about the status of competition. Our proposed design matches several features observed in real-world innovation contests.