This paper presents a model of cumulative innovation where firms are heterogeneous in their research ability. We study the optimal reward policy when the quality of the ideas and their subsequent development effort are private information. The optimal assignment of property rights must counterbalance the incentives of current and future innovators. The resulting mechanism resembles a menu of patents that have infinite duration and fixed scope, where the latter increases in the value of the idea.
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Publisher Info
Paper provided by Centro de Estudios Monetarios Y Financieros- in its series Papers with number
0012.
Length: 42 pages Date of creation: 2000 Date of revision: Handle: RePEc:fth:cemfdt:0012
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Find related papers by JEL classification: D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation O31 - Economic Development, Technological Change, and Growth - - Technological Change - - - Innovation and Invention: Processes and Incentives
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Sergei Guriev & Dmitriy Kvasov, 2005.
"Contracting on Time,"
American Economic Review,
American Economic Association, vol. 95(5), pages 1369-1385, December.
[Downloadable!]
Other versions:
Sergei Guriev & Dmitriy Kvasov, 2005.
"Contracting on Time,"
Working Papers
w0059, Center for Economic and Financial Research (CEFIR).
[Downloadable!]
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