Performance Feedback in Competitive Product Development

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Performance Feedback in Competitive Product Development

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Title: Performance Feedback in Competitive Product Development
Author: Gross, Daniel Pincus
Citation: Gross, Daniel P. "Performance Feedback in Competitive Product Development." RAND Journal of Economics 48, no. 2 (Summer 2017): 438–466. (Was Harvard Business School Working Paper, No. 16-110, March 2016. Revised June 2016.)
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Abstract: Performance feedback is ubiquitous in competitive settings where new products are developed. This paper 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.
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