I enjoyed reading this and the article in Works in Progress.
Another contemporary prize that I’ve observed up close, and where the benefits are debatable, was the L-prize for the LED bulb, awarded by the US Department of Energy to Philips in 2011. The lightbulb that was created and met the technical specifications was arguably over-engineered and quite expensive, and not too long after winning the prize, was no longer manufactured. Most LED bulbs that were made in the years that followed had a different design, and market adoption of energy-efficient LEDs were far more driven by steady cost declines in fundamental components, not bulb design per se. The critical take therefore is that the prize induced Philips (a very large bulb manufacturer, hardly all that motivated by the prize money) to put together a product that met the technical requirements, but which didn’t relax the binding constraints to adoption.
An alternative view is that this was the US government providing advertising, stimulating a segment of early adopters, who for any new product are so important. When dealing with a consumer product, rather than a navigation device or a narrow scientific accomplishment, I wonder if prizes can slightly, but critically, redirect both demand and supply on an emerging market for innovation. The theory about the compact fluorescent bulb and its limited adoption was that cost reduction efforts made these bulbs produce bad lighting (that pale blueish light). To induce an early supply of good quality lighting LED bulbs, maybe the L-prize made that happen sooner and early adopters pulled manufacturers in that direction in the years that followed. No idea how to test that counterfactual.
In short, how prizes might impact the demand-side of the market for innovation is an interesting angle. As you note, the cash compensation isn’t the main point, other than attracting headlines.
Thanks Nytta - fascinating example! It puts me in mind of a few others that have been mentioned to me since, like one in the late 19thC for a replacement for ivory in golfballs. It was a prize put up by a large company, but the best solution appears (caveat: from some secondary sources, which I need to check) to have been patented and the basis for creating a competitor rather than being entered for the prize.
In the LED case, I suppose we could find out what effect the prize had by asking those who had a go - perhaps it's something I should try (a bit of contemporary history!) Any recommended readings on LEDs would be very welcome!
Hello again. On the LED references, I know of a few references off the top of my head.
A major lesson was the low market adoption in USA of compact fluorescent lamps. It was analyzed by the US government and it appears the belief was it was a case of market failure. Through a slight bias to the market applied by the government through mostly conditional rebates, they believed they could put LEDs on the right path. That included the L-prize. This is their main retrospective analysis: https://www.energy.gov/sites/prod/files/2014/04/f14/cfl_lessons_learned_web.pdf
In their own promotional materials about the L-prize, they claim the prize made a difference. If this is "post hoc" arguments or not, isn't self-evident: https://www.osti.gov/servlets/purl/1221113
It looks like these are prizes aimed at creating a market pull for certain products and technology, and that way guide future developments in better directions. There is a steady stream of prizes like this, thought smaller in scope, in home automation and lighting: https://www.integratedhome.org
This could be a starting point for further searches.
I enjoyed reading this and the article in Works in Progress.
Another contemporary prize that I’ve observed up close, and where the benefits are debatable, was the L-prize for the LED bulb, awarded by the US Department of Energy to Philips in 2011. The lightbulb that was created and met the technical specifications was arguably over-engineered and quite expensive, and not too long after winning the prize, was no longer manufactured. Most LED bulbs that were made in the years that followed had a different design, and market adoption of energy-efficient LEDs were far more driven by steady cost declines in fundamental components, not bulb design per se. The critical take therefore is that the prize induced Philips (a very large bulb manufacturer, hardly all that motivated by the prize money) to put together a product that met the technical requirements, but which didn’t relax the binding constraints to adoption.
An alternative view is that this was the US government providing advertising, stimulating a segment of early adopters, who for any new product are so important. When dealing with a consumer product, rather than a navigation device or a narrow scientific accomplishment, I wonder if prizes can slightly, but critically, redirect both demand and supply on an emerging market for innovation. The theory about the compact fluorescent bulb and its limited adoption was that cost reduction efforts made these bulbs produce bad lighting (that pale blueish light). To induce an early supply of good quality lighting LED bulbs, maybe the L-prize made that happen sooner and early adopters pulled manufacturers in that direction in the years that followed. No idea how to test that counterfactual.
In short, how prizes might impact the demand-side of the market for innovation is an interesting angle. As you note, the cash compensation isn’t the main point, other than attracting headlines.
Thanks Nytta - fascinating example! It puts me in mind of a few others that have been mentioned to me since, like one in the late 19thC for a replacement for ivory in golfballs. It was a prize put up by a large company, but the best solution appears (caveat: from some secondary sources, which I need to check) to have been patented and the basis for creating a competitor rather than being entered for the prize.
In the LED case, I suppose we could find out what effect the prize had by asking those who had a go - perhaps it's something I should try (a bit of contemporary history!) Any recommended readings on LEDs would be very welcome!
Hello again. On the LED references, I know of a few references off the top of my head.
A major lesson was the low market adoption in USA of compact fluorescent lamps. It was analyzed by the US government and it appears the belief was it was a case of market failure. Through a slight bias to the market applied by the government through mostly conditional rebates, they believed they could put LEDs on the right path. That included the L-prize. This is their main retrospective analysis: https://www.energy.gov/sites/prod/files/2014/04/f14/cfl_lessons_learned_web.pdf
In their own promotional materials about the L-prize, they claim the prize made a difference. If this is "post hoc" arguments or not, isn't self-evident: https://www.osti.gov/servlets/purl/1221113
It looks like these are prizes aimed at creating a market pull for certain products and technology, and that way guide future developments in better directions. There is a steady stream of prizes like this, thought smaller in scope, in home automation and lighting: https://www.integratedhome.org
This could be a starting point for further searches.
Thank you very much!