Race meets bargaining in product development
Date
2020
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Source Title
Managerial and Decision Economics
Print ISSN
0143-6570
Electronic ISSN
Publisher
Wiley
Volume
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Pages
1 - 8
Language
English
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Abstract
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.