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Race meets bargaining in product development
Author(s) -
Karagözoğlu Emin,
Keskin Kerim,
Sağlam Çağrı
Publication year - 2021
Publication title -
managerial and decision economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.288
H-Index - 51
eISSN - 1099-1468
pISSN - 0143-6570
DOI - 10.1002/mde.3266
Subject(s) - contest , bargaining problem , product (mathematics) , incentive , economics , race (biology) , microeconomics , payment , new product development , race to the bottom , mathematical economics , nash equilibrium , management , mathematics , finance , political science , sociology , gender studies , geometry , law
We study product development in a firm, utilizing a multistage contest model (i.e., race ) with an endogenous length (with one stage or two stages) between two workers. We model the payments to workers using the normatively appealing Nash bargaining solution. We analytically characterize the equilibrium effort levels of workers and describe the conditions under which a full‐fledged final product (as opposed to, say, a prototype) is developed. We also provide an answer to the firm's problem of optimal incentive provision.