Efficient compensation for employees' inventions
AbstractWe analyze the legal reform concerning employees' inventions in Germany. Using a simple principal-agent model, we derive a unique efficient payment scheme: a bonus which is contingent on the project value. We demonstrate that the old German law creates inefficient incentives. However, the new law concerning university employees and the pending reform proposal concerning other employees also fail to implement first-best incentives. With suboptimal incentives to spend effort on inventions, the government's goal, an increase in the number of patents, is likely to be missed.
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Bibliographic InfoArticle provided by Springer in its journal European Journal of Law and Economics.
Volume (Year): 21 (2006)
Issue (Month): 2 (April)
Contact details of provider:
Web page: http://www.springerlink.com/link.asp?id=100264
Moral hazard; Hold-up; Efficient fixed wage;
Other versions of this item:
- Kirstein, Roland & Will, Birgit E., 2003. "Efficient Compensation for Employees? Inventions," CSLE Discussion Paper Series 2003-03, Saarland University, CSLE - Center for the Study of Law and Economics.
- Roland Kirstein & Birgit Will, . "Efficient Compensation for Employees’ Inventions," German Working Papers in Law and Economics 2004-1-1080, Berkeley Electronic Press.
- K12 - Law and Economics - - Basic Areas of Law - - - Contract Law
- J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
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