Che, Yeon-Koo, Iossa, Elisabetta and Rey, Patrick (2016) Prizes versus contracts as incentives for innovation. TSE Working Paper, n. 16-695, Toulouse.

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Procuring an innovation involves motivating a research effort to generate a new idea and then implementing that idea efficiently. If research efforts are unveriable and implementation costs are private information, a trade-off arises between the two objectives. The optimal mechanism resolves the trade-off via two instruments: a cash prize and a follow-on contract. It primarily uses the latter, by favoring the innovator at the implementation stage when the value of the innovation is above a certain threshold and handicapping the innovator when the value of the innovation is below that threshold. A cash prize is employed as a supplementary incentive only when the value of innovation is sufficiently high. These features are consistent with current practices in the procurement of innovation and the management of unsolicited proposals.

Item Type: Monograph (Working Paper)
Language: English
Date: September 2016
Place of Publication: Toulouse.
Uncontrolled Keywords: Contract rights, Inducement Prizes, Innovation, Procurement and R&D
JEL Classification: D44 - Auctions
D82 - Asymmetric and Private Information
H57 - Procurement
O31 - Innovation and Invention - Processes and Incentives
O38 - Government Policy
O39 - Other
Divisions: TSE-R (Toulouse)
Institution: Université Toulouse Capitole
Site: UT1
Date Deposited: 14 Sep 2016 08:02
Last Modified: 01 Jul 2021 15:10
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