The Hay and the Carrot: A Model of Corporate Sponsoring of Academic Research
AbstractIn a moral hazard model with relationship-speci?c investment (?hay?) and limited liability (no ?stick?), we compare two institutional regimes: one without, and one with, ex-post incentives (?carrot?). We examine the welfare implications of introducing ?carrots?. We use this model to analyze corporate sponsoring of academic research. Under restrictive technological assumptions, the introduction of carrots meets certain ciency criteria and cannot make the agent (researcher) worse. These results no longer hold once we allow for a ?bang-for-your-buck?ect - which occurs when the researcher?s following the sponsor?s preferred strategy results in the principal (sponsor) being able to achieve the same results with fewer investment dollars - in conjunction with a concave value function for the sponsor. In this case, the introduc- tion of carrots may be inecient and may make the agent worse. However, if the agent is a monopolist, a renegotiation-proof contract implies that the agent can never be made worse by the introduction of carrots, and carrots never reduce social welfare.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University of Adelaide, Centre for International Economic Studies in its series Centre for International Economic Studies Working Papers with number 2005-11.
Length: 23 pages
Date of creation: Jul 2005
Date of revision:
You can help add them by filling out this form.
reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dmitriy Kvasov).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.