This paper analyzes a procurement setting with identical firms and stochastic innovations. In contrast to the previous literature, I show that a procurer who cannot charge entry fees may prefer a fixed-prize tournament to a first-price auction. The reason is that holding an auction may leave...

I compare an auction and a tournament in a procurement setting where a noncontractible signal about the quality that each firm is able to supply is observed by the procurer and all competing firms. Signals are affected by firms noncontractibleinvestments in R&D and the procurers precision of...