Abstract
Performance feedback is ubiquitous in competitive settings where new products are developed. This paper introduces a fundamental tension between incentives and improvement in performance evaluation. 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 may thus be desirable for a principal seeking innovation.
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