Prizes and patents: Using market signals to provide incentives for innovations
AbstractWe consider environments in which agents other than innovator receive the signals about the quality of innovation. We study whether mechanisms can be found which exploit market information to provide appropriate incentives for innovation. If such mechanisms are used, the innovator has incentives to manipulate market signals. We show that if an innovator cannot manipulate market signals, then the efficient levels of innovation can be uniquely implemented without deadweight losses – for example, by using prizes. Patents are necessary if the innovator can manipulate market signals. For an intermediate case of costly signal manipulation, both patents and prizes may be optimal.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Economic Theory.
Volume (Year): 147 (2012)
Issue (Month): 2 ()
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Web page: http://www.elsevier.com/locate/inca/622869
Innovations; Mechanism design; Patents; Prizes; Economic growth;
Other versions of this item:
- V. V. Chari & Mikhail Golosov & Aleh Tsyvinski, 2009. "Prizes and Patents: Using Market Signals to Provide Incentives for Innovations," Levine's Working Paper Archive 814577000000000398, David K. Levine.
- V.V. Chari & Mikhail Golosov & Aleh Tsyviski, 2009. "Prizes and patents: using market signals to provide incentives for innovations," Working Papers 673, Federal Reserve Bank of Minneapolis.
- D04 - Microeconomics - - General - - - Microeconomic Policy: Formulation; Implementation; Evaluation
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
- O31 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
- O34 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital
- O4 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
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