Prizes versus Contracts as Incentives for Innovation

Che, Yeon-Koo, Iossa, Elisabetta and Rey, Patrick (2016) Prizes versus Contracts as Incentives for Innovation. TSE Working Paper, n. 16-695

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Official URL: http://tse-fr.eu/pub/30793

Abstract

Procuring an innovation involves motivating a research effort to generate a new idea and then implementing that idea efficiently. If research efforts are unverifiable and implementation costs are private information, a trade-off arises between the two objectives. The optimal mechanism resolves the tradeoff via two instruments: a monetary prize and a contract to implement the project. The optimal mechanism favors the innovator in contract allocation when the value of innovation is above a certain threshold, and handicaps the innovator otherwise. A monetary prize is employed as an additional incentive but only when the value of innovation is suficiently high.

Item Type: Monograph (Working Paper)
Language: English
Date: September 2016
Uncontrolled Keywords: Contract rights, Inducement Prizes, Innovation, Procurement and R&D
JEL codes: D44 - Auctions
D82 - Asymmetric and Private Information
H57 - Procurement
O31 - Innovation and Invention - Processes and Incentives
O38 - Government Policy
O39 - Other
Subjects: B- ECONOMIE ET FINANCE
Divisions: TSE-R (Toulouse)
Institution: Université Toulouse Capitole
Site: UT1
Date Deposited: 14 Sep 2016 08:02
Last Modified: 21 Mar 2018 14:10
OAI ID: oai:tse-fr.eu:30793
URI: http://publications.ut-capitole.fr/id/eprint/22358

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