Behavioral Mechanism Design: Optimal Contests for Simple Agents

Incentives are more likely to elicit desired outcomes when they are designed based on accurate models of agents' strategic behavior. A growing literature, however, suggests that people do not quite behave like standard economic agents in a variety of environments, both online and offline. What consequences might such differences have for the optimal design of mechanisms in these environments? In this paper, we explore this question in the context of optimal contest design for simple agents---agents who strategically reason about whether or not to participate in a system, but not about the input they provide to it. Specifically, consider a contest where $n$ potential contestants with types $(q_i,c_i)$ each choose between participating and producing a submission of quality $q_i$ at cost $c_i$, versus not participating at all, to maximize their utilities. How should a principal distribute a total prize $V$ amongst the $n$ ranks to maximize some increasing function of the qualities of elicited submissions in a contest with such simple agents? We first solve the optimal contest design problem for settings with homogenous participation costs $c_i = c$. Here, the optimal contest is always a simple contest, awarding equal prizes to the top $j^*$ contestants for a suitable choice of $j^*$. (In comparable models with strategic effort choices, the optimal contest is either a winner-take-all contest or awards possibly unequal prizes, depending on the curvature of agents' effort cost functions.) We next address the general case with heterogeneous costs where agents' types are inherently two-dimensional, significantly complicating equilibrium analysis. Our main result here is that the winner-take-all contest is a 3-approximation of the optimal contest when the principal's objective is to maximize the quality of the best elicited contribution.Comment: This is the full version of a paper in the ACM Conference on Economics and Computation (ACM-EC), 201

Design elements that influence the participation of solvers in innovation contests

This study analyzes all of the innovation contests, also known as crowdsourcing contests, posted on the Inocrowd platform. Inocrowd is an open innovation intermediary firm, based in Portugal, that hosts crowdsourcing contests for firms, called “seekers” looking to solve innovation challenges. The main aim of this study is to examine to what extent some design elements of crowdsourcing contests can influence the participation of “solvers” in these contests. The design elements considered in this study are the monetary award amount, the project type, the platform maturity and the anonymity of “seeker” firms. We then created a mathematical model that can be used to predict the participation of “solvers” in crowdsourcing contests, based on the design elements examined. This paper contributes to the growing research field of open innovation, particularly crowdsourcing contests hosted by intermediary firms, and will provide managers with a framework for designing innovation contests with more participation.Este estudo tem como objetivo analisar todos os concursos de inovação, ou concursos de crowdsourcing, colocados na plataforma Inocrowd. A Inocrowd e um intermediário de inovação aberta, sediada em Portugal, que coloca concursos de crowdsourcing para empresas, conhecidas como ”seekers”, que procuram resolver desafios de inovação. O objetivo primário deste estudo é examinar até que ponto alguns elementos de design destes concursos de inovação influenciam a participação de investigadores, de nome “solvers”, nestes concursos. Os elementos de design considerados nesta investigação são a valor do prémio monetário, o tipo de projeto, a maturidade da plataforma e o anonimato dos “seekers”. Um modelo matemático foi desenvolvido no âmbito de prever a participação dos “solvers” nos concursos de crowdsourcing colocados na plataforma Inocrowd, baseado nos elementos de design examinados. Este estudo contribui para área de pesquisa crescente que e a Inovação aberta, particularmente na área dos concursos de crowdsourcing colocados por intermediários de inovação, tendo como objetivo fornecer aos gestores uma estrutura para criar concursos de inovação com mais participação

Leveraging the power of creative crowds for innovative brands: the eYeka crowdsourcing initiatives

The thesis tried to move beyond the Crowdsourcing phenomenon intended as a mere micro-task production outlining key features of the main typologies of contest which a firm could select in pursuing this Business Model. The dissertation thus advice companies on what kind of contests format is more suitable to be implemented in order to reach the desired objective, by tailoring not only challenges but also incentive mechanisms to engage the right crowd even in terms of motivational aspectsope

Comparing Strategies for Winning Expert-rated and Crowd-rated Crowdsourcing Contests: First Findings

Many studies have been done on expert-rated crowdsourcing contests but few have examined crowd-rated contests in which winners are determined by the voting of the crowd. Due to the different rating mechanisms, determinants for winning may be different under two types of contests. Based on previous studies, we identify three types of winning determinants: expertise, submission timing, and social capital. Our initial investigation, based on 91 entries of two contests in Zooppa, supports that those variables play different roles in winning crowd-rated contests than in winning expert-rated contests. Specifically, past winning experience in crowd-rated contests predicts future success in crowd-rated contests, while past winning experience in expert-rated contests predicts future success in expert-rated contests. We discover a U-shaped relationship between the submission time and winning in both types of contests. Social capital elevates the probability of winning a crowd-rated contest only if the social capital is sufficiently high

INFORMATION TRANSPARENCY AND USER BEHAVIOR IN EMERGING ONLINE MARKETPLACES: EMPIRICAL STUDIES OF SOCIAL MEDIA AND OPEN INNOVATION MARKETS

Web 2.0 and social media have significantly increased the amount of information available to users not only about firms and their offerings, but also about the activities of other individuals in their networks and markets. It is widely acknowledged that this increased availability of information is likely to influence a user's behavior and choices. However, there are very few systematic studies of how such increased information transparency influences user behavior in emerging marketplaces. My dissertation seeks to examine the impact of increased information transparency - particularly, information about other individuals - in two emerging platforms. The first essay in my dissertation compares online "social" marketing on Facebook with "non-social" marketing and examines their relative impacts on the likelihood of adoption, usage and diffusion of an "App". While social marketing - wherein a user gets to see which of her other friends have also "liked" the product being marketed- is one of the fastest growing online marketing formats, there are hardly any studies that have examined the value of the social aspect of such marketing. I find that social marketing is associated with increased app adoption, usage, and diffusion as compared to non-social marketing. The study also uncovers interesting tradeoffs between the effects of different types of "social" information on user behavior outcomes. The second essay examines the behavior of contestants in an open innovation design marketplace, wherein firms seek solutions from a crowd through an online contest. The study examines how the availability of information about other contestants as well as the availability of feedback information provided to others by the contest holder, impacts a focal contestant's behavior and outcomes. I find that contestants adopt different strategic behaviors that increase their odds of winning the contest under the different information-transparency regimes. The findings have interesting implications for the design of online contests and crowdsourcing markets. Overall, my dissertation provides a deeper understanding of how the visibility of different types of information in online platforms impacts individual behaviors and outcomes

Opening up innovation processes through contests in the food sector

Purpose: The purpose of this paper is to investigate how an adequate mix of technological, organisational and managerial tools might support Open Innovation (OI) processes achieved by contests in the food sector. Design/methodology/approach: The methodology of this paper is exploratory in nature. Data have been gathered about the 140 innovation contests launched by the best global food brands (2013 BusinessWeek/Interbrand Best Global Brands) over the last decade. Findings: The research highlights the main changes that have occurred over the last decade, showing that the choice of platform type for contest launches is often neglected or considered as an ancillary element. Indeed, it is a choice that embeds another set of technological, organisational and managerial tools that strongly influence the collaborative behaviour (and the participation itself) of partners throughout the innovation process. Research limitations/implications: Companies investigated in this paper consist exclusively of top brands in the sector. Future research should strive to obtain larger samples, develop a set of fine-grained hypotheses, and test them by using appropriate statistical techniques. Originality/value: This paper fills an inexplicable gap in academic literature due to the fact that food companies are those that mainly use contests in order to implement OI but they are scarcely researched regarding this issue

Surprising Results from Large Crowds Using Micro-Purchase Challenges - Using Contests on Freelancing Communities to Source Innovative, Impactful and Cost-Effective Solutions

Our world is more connected than ever before. The new digital economy is empowering platforms and crowds to become a progressively strategic way for organizations to innovate ahead of their competition. Existing research shows the effectiveness and quality of solutions crowdsourcing yields, yet few organizations genuinely understand it nor are leveraging those solutions to unlock the full range of benefits. Moreover, early adopters often face structural and financial barriers towards evangelizing digital platforms at scale within their organizations. NASA is an exception - being an advocate of the field since 2010, it has paved the path for large organizations to follow. An empirical analysis is conducted on NASA's Center of Excellence for Collaborative Innovation (CoECI) micro-purchase challenges on a crowd-based platform to assess the cost-savings, quality of work, time for work turnaround and brand effects of using this problem-solving mechanism. The results proved to provide a tangible impact on all four parameters. As such, micro-purchases could become a compelling entry-point for organizations who are willing to experiment and subsequently build a convincing business case to present to stakeholders. The paper concludes with NASA's learnings, supplemented by literature, on how to redesign business processes, change conventional thinking and create an organization that will transform its future with crowds

Embracing open innovation to acquire external ideas and technologies and to transfer internal ideas and technologies outside

The objective of this dissertation is to increase understanding of how organizations can embrace open innovation in order to acquire external ideas and technologies from outside the organization, and to transfer internal ideas and technologies to outside the organization. The objective encompasses six sub-objectives, each addressed in one or more substudies. Altogether, the dissertation consists of nine substudies and a compendium summarizing the substudies. An extensive literature review was conducted on open innovation and crowdsourcing literature (substudies 1–4). In the subsequent empirical substudies, both qualitative research methods (substudies 5–7) and quantitative research methods (substudies 8–9) were applied. The four literature review substudies provided insights on the body of knowledge on open innovation and crowdsourcing. These substudies unveiled most of the influential articles, authors, and journals of open innovation and crowdsourcing disciplines. Moreover, they identified research gaps in the current literature. The empirical substudies offer several insightful findings. Substudy 5 shows how non-core ideas and technologies of a large firm can become valuable, especially for small firms. Intermediary platforms can find solutions to many pressing problems of large organizations by engaging renowned scientists from all over world (substudy 6). Intermediary platforms can also bring breakthrough innovations with novel mechanisms (substudy 7). Large firms are not only able to garner ideas by engaging their customers through crowdsourcing but they can also build long-lasting relations with their customers (substudies 8 and 9). Embracing open innovation brings challenges for firms too. Firms need to change their organizational structures in order to be able to fully benefit from open innovation. When crowdsourcing is successful, it produces a very large number of new ideas. This has the consequence that firms need to allocate a significant amount of resources in order to identify the most promising ideas. In an idea contest, customarily, only one or a few best ideas are rewarded (substudy 7). Sometimes, no reward is provided for the selected idea (substudies 8 and 9). Most of the ideas that are received are not implemented in practice

Crowdsearch

A common economic process is crowdsearch, wherein a group of agents is invited to search for a valuable physical or virtual object, e.g. creating and patenting an invention, solving an open scientific problem, or identifying vulnerabilities in software. We study a binary model of crowdsearch in which agents have different abilities to find the object. We characterize the types of equilibria and identify which type of crowd maximizes the likelihood of finding the object. Sometimes, however, an unlimited crowd is not sufficient to guarantee that the object is found. It even can happen that inviting more agents lowers the probability of finding the object. We characterize the optimal prize and show that offering only one prize (winner-takes-all) maximizes the probability of finding the object but is not necessarily optimal for the crowdsearch designer.Comment: arXiv admin note: substantial text overlap with arXiv:2304.0007