In an innovation tournament, an organizer solicits innovative ideas from a number of independent agents. Agents exert effort to develop their solutions, but their outcomes are unknown due to technical uncertainty and/or subjective evaluation criteria. In order to incentivize agents to make their best effort, the organizer needs to devise a proper award scheme. While extant literature either assumes a winner-take-all scheme a priori or shows its optimality under specific distributions for uncertainty, this paper derives necessary and sufficient conditions under which the winner-take-all scheme is optimal. These conditions are violated when agents perceive it very likely that only few agents receive high evaluation or when a tournament does not require substantial increase in agents' marginal cost of effort to develop high-quality solutions. Yet, the winner-take-all scheme is optimal in many practical situations, especially when agents have symmetric beliefs about their evaluation. In this case, the organizer should offer a larger winner prize when he is interested in obtaining a higher number of good solutions, but interestingly the organizer need not necessarily raise the winner prize when anticipating more participants to a tournament.

Economic growth in many countries is increasingly driven by successful startups that operate as online platforms. These success stories have motivated us to define and classify various online platforms according to their business models. This study discusses strategic and operational issues arising from five types of online platforms (resource sharing, matching, crowdsourcing, review, and crowdfunding) and presents some research opportunities for operations management scholars to explore.

In a contest in which solvers with heterogeneous expertise exert effort to develop solutions, a recent paper (Terwiesch, C., Y. Xu. 2008. Innovation contests, open innovation and multiagent problem solving. Management Science. 54( 9) 1529-1543) argues that as more solvers enter the contest, every solver will reduce effort due to a lower probability of winning the contest. This paper corrects mistakes in this theory, and shows that there exist high-expertise solvers who may raise their effort in response to increased competition. This is because more entrants raise the expected best performance among other solvers, creating positive incentives for solvers to exert higher effort to win the contest. Due to this positive effect, we find that a free-entry open contest is more likely to be optimal to a contest organizer than what Terwiesch and Xu (2008) and other prior literature asserted.

This paper considers the normative implications of technical change for tax policy design. A task-to-talent assignment model of the labor market is embedded into an optimal tax problem. Technical change modifies equilibrium wage growth across talents and the substitutability of talents across tasks. The overall optimal policy response is to reduce marginal income taxes on low to middle incomes, while raising those on middle to high incomes. The reform favors those in the middle of the income distribution, reducing their average taxes while lowering transfers to those at the bottom. (JEL D31, H21, H23, H24, J31, O33) Technical change is inherently redistributive, complementing the labor of some whilst substituting for that of others. A large positive literature has analyzed its impact on the wage distribution. This literature has emphasized skill-biased technical change that favors the skilled over the unskilled and, more recently, has stressed the role of technical change in replacing "routine labor" in the middle of the wage distribution. However, while the positive literature documenting the redistributive nature of technical change is extensive, normative work exploring the policy implications of such change is not. 1 Our paper fills this gap. We explore how more than 30 years of technical change in the United States has affected the policy recommendations that economic theory provides. Overall, we find that such change creates a rationale for a modest adjustment of optimal policy in a direction that favors middle income earners, reducing their average taxes while lowering transfers to those at the bottom. Optimal marginal taxes are reduced on incomes that are low (but not the lowest) and raised on incomes that are high (but not the highest). Although, the