Performance Feedback in Competitive Product Development

72 Pages Posted: 28 Jul 2015 Last revised: 6 Feb 2019

See all articles by Daniel P. Gross

Daniel P. Gross

Duke University - Fuqua School of Business; National Bureau of Economic Research

Date Written: October 24, 2016

Abstract

Performance feedback is ubiquitous in competitive settings where new products are developed. This article 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.

Keywords: Feedback; Evaluation; Learning; Tournaments; Innovation

JEL Classification: C51, C57, D82, D83, M55, O31, O32

Suggested Citation

Gross, Daniel P., Performance Feedback in Competitive Product Development (October 24, 2016). RAND Journal of Economics, Vol. 48, No. 2, Summer 2017, Harvard Business School Research Paper No. 16-110, Available at SSRN: https://ssrn.com/abstract=2636319 or http://dx.doi.org/10.2139/ssrn.2636319

Daniel P. Gross (Contact Author)

Duke University - Fuqua School of Business ( email )

Box 90120
Durham, NC 27708-0120
United States

National Bureau of Economic Research ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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