Research Tournament and Competition Effect.

This paper investigates the effect of competition on innovative activity. In the research contest, the foremost reason for limiting entry into tournaments is to raise the level of contestant’s effort and to make the firms compete so that high value of innovation will be procured. Thus, a sponsor (or government) needs to take account into effort-inducing effect as well as effort-reducing effect from competition when she restricts entry. In this paper, this competition effect will be analyzed for the model of procurement for innovation, and it is shown that the individual effort level is not monotonic to the number of contestants.