Prizes

Incentives for innovation — contest design with proportional prizes

A major theme of my research concerns the impacts of innovation, and how new types of prize contests might improve incentives and inform the flow of new technology for African agriculture.

The  latest on this is a May 2012 essay entitled Transformational Incentives for USAID’s Frontiers in Development  book and conference; with related CGD paper by Kim Elliott.  Those applications draw on a much more general research paper on experiments with contest design, summarized in these presentation slides.

More details on the history and  motivation for new kinds of contests comes from an IFPRI Discussion Paper entitled Accelerating Innovation (December 2008) which describes the history and economics of innovation incentives, and shows how African agriculture could benefit from a new kind of technology contest in which proportional cash payments would be made to innovators after their technologies are adopted, like a royalty payment for non-market services.  Prize rewards would be strictly proportional to the extent of adoption and impact, using verifiable data from controlled experiments and farm surveys to document which new techniques work best in what areas.

My 2010 article  in Journal of Public Economics, written with Tim Cason and Roman Sheremeta, provides formal test of entry and performance in contests with proportional as opposed to winner-take-all prizes.  An earlier journal article, Paying for Prosperity: How and Why to Invest in Agricultural R&D for Africa motivates the idea in terms of what’s needed for poverty alleviation in Africa.  My first article on this subject was in 2003, entitled Research Prizes: A Mechanism to Reward Agricultural Innovation in Low-Income Regions.

The potential role of proportional prizes as opposed to other innovation incentives is discussed in detail by Kim Elliott at the Center for Global Development’s in her 2010 paper on pull mechanisms for agricultural innovation.  In 2011, the World Bank’s Agricultural Pull Mechanism initiative is actively considering how to design new contests.  Much can be learned from other sectors:  here is a fun example of using proportional prizes to keep golf players competitive, and a serious proposal for a “health impact fund” using proportional payments for health.

The research behind this initiative has been generously supported by grants from the Andrew S. Adelson Family Foundation and the International Food Policy Research Institute.  The approach has been endorsed by FARA, the Forum for Agricultural Research in Africa, and it builds on a decade of USAID-funded impact-assessment training workshops and case studies in West Africa.