Performance Feedback in Competitive Product Development

Performance feedback is ubiquitous in competitive settings where new products are developed. This article introduces a fundamental tension between incentives and improvement in the provision of feedback. Using a sample of four thousand commercial logo design tournaments, I show that feedback reduces participation but improves the quality of subsequent submissions, with an ambiguous effect on high-quality output. To evaluate this tradeoff, I develop a procedure to estimate agents' effort costs and simulate counterfactuals under alternative feedback policies. The results suggest that feedback on net increases the number of high-quality ideas produced and is thus desirable for a principal seeking innovation.

[1]  Philip A. Haile,et al.  Inference with an Incomplete Model of English Auctions , 2000, Journal of Political Economy.

[2]  R. Tollison,et al.  Toward a theory of the rent-seeking society , 1982 .

[3]  Masaki Aoyagi,et al.  Information Feedback in a Dynamic Tournament , 2003, Games Econ. Behav..

[4]  Kevin R. Murphy,et al.  Performance appraisal: An organizational perspective. , 1991 .

[5]  E. Lazear,et al.  Rank-Order Tournaments as Optimum Labor Contracts , 1979, Journal of Political Economy.

[6]  Kostas Bimpikis,et al.  Designing Dynamic Contests , 2015, EC.

[7]  Maria Goltsman,et al.  Interim Performance Feedback in Multistage Tournaments: The Optimality of Partial Disclosure , 2011, Journal of Labor Economics.

[8]  Roman M. Sheremeta,et al.  A survey of experimental research on contests, all-pay auctions and tournaments , 2012, Experimental Economics.

[9]  Florian Ederer,et al.  Feedback and Motivation in Dynamic Tournaments , 2010 .

[10]  Drew Fudenberg,et al.  Preemption, Leapfrogging, and Co­mpetition in Patent Races , 1983 .

[11]  Heidi L. Williams.  Innovation Inducement Prizes: Connecting Research to Policy , 2012 .

[12]  D. McFadden.  MEASUREMENT OF URBAN TRAVEL DEMAND , 1974 .

[13]  Jay Pil Choi,et al.  Dynamic R&D Competition under "Hazard Rate" Uncertainty , 1991 .

[14]  T. Rieck.  Information Disclosure in Innovation Contests , 2010 .

[15]  Ernst Fehr,et al.  Deception and Incentives: How Dishonesty Undermines Effort Provision , 2007 .

[16]  Navin Kartik,et al.  Contests for Experimentation , 2017, Journal of Political Economy.

[17]  Kevin Boudreau,et al.  Performance Responses To Competition Across Skill-Levels In Rank Order Tournaments: Field Evidence and Implications For Tournament Design , 2015 .

[18]  Ian L. Gale,et al.  Optimal Design of Research Contests , 2003 .

[19]  Nagore Iriberri,et al.  The Importance of Relative Performance Feedback Information: Evidence from a Natural Experiment Using High School Students , 2009 .

[20]  Jennifer Brown,et al.  Quitters Never Win: The (Adverse) Incentive Effects of Competing with Superstars , 2011, Journal of Political Economy.

[21]  Anders U. Poulsen,et al.  Feedback and Incentives: Experimental Evidence , 2008 .

[22]  Yi Xu,et al.  Innovation Contests, Open Innovation, and Multiagent Problem Solving , 2008, Manag. Sci..

[23]  Motty Perry,et al.  Tournaments with midterm reviews , 2009, Games Econ. Behav..

[24]  Gustavo Manso.  Motivating Innovation , 2010 .

[25]  D. Gill.  Strategic Disclosure of Intermediate Research Results , 2008 .

[26]  Curtis R. Taylor.  Digging for golden carrots: an analysis of research tournaments , 1995 .

[27]  Kyung Hwan Baik,et al.  Effort Levels in Contests with Two Asymmetric Players , 1994 .