A second potential advantage of prize contests is that, if properly designed, they may help federal agencies to be more tolerant of prudent risk taking than traditional research support mechanisms.16 Inducement prize contests can effectively shift more of the risk involved in pursuing a particular technical objective from the administering agency to the contestants, who are likely to be in a better position to evaluate the risk associated with different approaches to the contest's objective. With research grants or procurement contracts, federal agencies assume some of the risk of failure of their grantees or contractors. By contrast, with a prize contest, the agency only pays out its reward or prize if the criteria for winning are met —in this case, achieving a specified objective. It should be noted, however, that along with the higher administration costs and risk associated with conventional grants and contracts, federal agencies are likely to receive significantly greater substantive information flows from researchers supported by these instruments than they would receive from prize contestants per se.

A third advantage of prize contests may be their ability to leverage the financial resources of a contest sponsor by inducing contestants to invest their own resources in research and innovation aimed at the prize objective as they compete for the prize's cash and non-cash rewards. In addition to cash awards, prize contests may offer publicity or free advertising generated by the contest itself; the imprimatur of a respected prize sponsor; recognition within a particular community of peers; the potential for follow-on grants, procurement contracts, or venture-capital support; or increased commercial demand for a winning process or technology. That is, non-cash incentives may attract some private-sector participants that value them as much as or more than the monetary value of a prize. In some cases, these collateral benefits will accrue not only to winners but to other contest participants as well. Ultimately, the level of contestant investments induced (or leveraged) by a prize is a function of both the size or value of the prize offered and the probability of winning.

A fourth comparative strength of inducement prize contests (and recognition prize contests for that matter) that received particular emphasis during workshop discussions is the potential of prizes to inspire and educate the public. While seeking to induce the efforts of contestants, inducement prize contests have often incited action by “third parties” —students, policymakers, opinion leaders, et al.—consistent with or complementary to the primary objective(s) of a prize contest. For example, recent space prize contests including the X Prize, which seeks to advance development of reusable, manned, suborbital space craft, and the Cheap Access to Space (CATS) Prize, which seeks to advance the development of inexpensive launch technologies, are focused on achieving specific technical objectives and demonstrating the feasibility and commercial potential of particular technologies. 17 Yet they are also serving to inspire the American public and build popular support for space-related research in general.



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