Performance Feedback in Competitive Product Development
72 Pages Posted: 28 Jul 2015 Last revised: 6 Feb 2019
Date Written: October 24, 2016
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: Suggested Citation