Motivated by the EU concept of Pre-Commercial Procurement and the massivepresence of SMEs in the European economy, we study how budget constraints affect R&D effort in sequential elimination tournaments. We show that introducingbudget constraints leads to a non-monotonicity in unconstrained contestants' effort.Furthermore, we show that if the budget asymmetry is not too large, unconstrainedcontestants exert higher effort than when faced with unconstrained contestants only.
JEL-Classification: D72;H57
Keywords: Pre-commercial procurement, contests, budget constraints
Frei zugängliche Version: (econstor)
http://hdl.handle.net/10419/190794