Otago Innovation Ltd commercialisation manager Graham Strong said it would spend up to $20,000 developing the winning idea into an app.
The winner of the competition, dubbed the "Appstar 2012 Mobile App Competition", would earn a percentage of the revenue made through the sale of the app, Mr Strong said.
The winning idea would likely take advantage of "specialised" knowledge held by the university.
"The key question in my mind is where does the real opportunity exist, because there is about 2500 apps that go up on the [Apple] App Store each day, so it's quite a competitive environment.
"I feel the advantage for the university is around highly specialised niche content that you can't necessarily find somewhere else." A successful example which the competition had a "realistic" chance of replicating was a Welsh language app developed by a university in Wales, which made more than $US100,000 ($NZ123,000) after 8000 people paid $US13 to download it.
The competition had been running for about a week and a-half and interest had been "very strong", he said.
Apart from the competition, Otago Innovation Ltd, Otago University's commercialisation arm, was also looking at developing other app ideas but it was "too early" to reveal details.
Mobile applications were just another way the university could monetise its ideas, he said.
"The mobile application is just another vehicle to get the information out there."
A panel of judges and audience will choose the winning idea from the top five at a presentation on September 26.
If the chosen idea became a successful app, Otago Innovation would look at running the competition again.
"It's a bit of a test case and we will just see how it goes," Mr Strong said.
