The academic literature on prizes covers multiple decades and several disciplines, ranging from lots of economic theory, to historical studies of Victorian agricultural medals, and to randomised trials run on software contests. This range is a strength, but it also makes the job of having to sift through the literature onerous and time-consuming. These papers are categorised around three questions: why run a prize in the first place, what the evidence says happens when you do run one, and insights on how to design and govern one.

The economic case for prizes is well-developed. A prize is superior to a grant when nobody knows in advance what the winning solution might look like, or where it could come from. A prize is preferable to a patent when the social value of the solution is more than what the market on its own would pay for it. This section of the report looks at some of the foundational papers that present the reasoning and conditions under which each of these claims holds.

The next section moves on from economic theory to look at some of the key empirical evidence on the effects of prizes. These papers provide data on how prizes spur technological growth; how prize participants are heavily motivated by non-monetary incentives, and how prizes can leverage capital far more than the value of the prize purse.

The last section looks at papers that discuss the operational choices in relation to prizes. The literature here considers issues such as how many entrants to admit, whether to split the purse across several winners or hand it to one winner, and how to govern prizes in dynamic conditions. 

Taken together, this report presents some of the most important articles that cover the reasons for why prizes are needed, the evidence on important prize effects, and the considerations for design choices. If you are new to prizes, or perhaps still deciding whether one suits your problem, or simply want to know what the literature actually says, this report provides a shortcut to some of the foundational thinking from the field of prizes. We hope it provides arguments and information that you can act on.

Want to explore the evidence? Download the report to discover the ten essential papers shaping the evidence on challenge prizes.