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Prizes, Patents, and Technology Procurement: A Proposed Analytical Framework

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  • Brennan, Timothy J.

    ()
    (Resources for the Future)

  • Macauley, Molly

    ()
    (Resources for the Future)

  • Whitefoot, Kate
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    Abstract

    Policy and entrepreneurial communities are increasingly promoting innovation by using prizes but their distinguishing features remain inadequately understood. Models of patents treat winning a patent as winning a prize; other models distinguish prizes primarily as public lump-sum (re)purchase of a patent. We examine advantages of prizes based on the ability to customize rewards, manage competition, generate publicity, and cover achievements otherwise not patentable. We compare prizes to patents using a model based first on whether the procuring party knows its needs and technology, its needs but not its technology, or neither. The second factor is the risk that the investment in research will prove profitable, where the greater the risk, the more the procuring party should share in it through ex ante cost coverage or payment commitment. The model suggests a framework that may be extended to cover other means of technology inducement, including grants, customized procurement, and off-the-shelf purchase.

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    File URL: http://www.rff.org/documents/RFF-DP-11-21-REV.pdf
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    Bibliographic Info

    Paper provided by Resources For the Future in its series Discussion Papers with number dp-11-21-rev.

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    Date of creation: 27 May 2011
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    Handle: RePEc:rff:dpaper:dp-11-21-rev

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    Related research

    Keywords: prizes; procurement; contracts; patents; public sector; technological change; innovation; productivity;

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    References

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    1. Julien Pénin, 2003. "Patents versus ex-post rewards : a new look," Cahiers de recherche du Département des sciences économiques, UQAM 20-19, Université du Québec à Montréal, Département des sciences économiques.
    2. Mowery, David C. & Nelson, Richard R. & Martin, Ben R., 2010. "Technology policy and global warming: Why new policy models are needed (or why putting new wine in old bottles won't work)," Research Policy, Elsevier, vol. 39(8), pages 1011-1023, October.
    3. repec:hal:journl:halshs-00177614 is not listed on IDEAS
    4. repec:hal:cesptp:halshs-00177614 is not listed on IDEAS
    5. Parry, Ian W.H. & Williams, Roberton C., 2011. "Moving U.S. Climate Policy Forward: Are Carbon Taxes the Only Good Alternative?," Discussion Papers dp-11-02, Resources For the Future.
    6. Newell, Richard & Wilson, Nathan, 2005. "Technology Prizes for Climate Change Mitigation," Discussion Papers dp-05-33, Resources For the Future.
    7. Richard L. Fullerton & R. Preston McAfee, 1999. "Auctioning Entry into Tournaments," Journal of Political Economy, University of Chicago Press, vol. 107(3), pages 573-605, June.
    8. Barry J. Nalebuff & Joseph E. Stiglitz, 1983. "Prices and Incentives: Towards a General Theory of Compensation and Competition," Bell Journal of Economics, The RAND Corporation, vol. 14(1), pages 21-43, Spring.
    9. Michael Kremer, 1998. "Patent Buyouts: A Mechanism For Encouraging Innovation," The Quarterly Journal of Economics, MIT Press, vol. 113(4), pages 1137-1167, November.
    10. Rogerson, William P, 1989. "Profit Regulation of Defense Contractors and Prizes for Innovation," Journal of Political Economy, University of Chicago Press, vol. 97(6), pages 1284-1305, December.
    11. Kremer, Michael R., 1998. "Patent Buyouts: A Mechanism for Encouraging Innovation," Scholarly Articles 3693705, Harvard University Department of Economics.
    12. Wright, Brian Davern, 1983. "The Economics of Invention Incentives: Patents, Prizes, and Research Contracts," American Economic Review, American Economic Association, vol. 73(4), pages 691-707, September.
    13. Baye, Michael R. & Hoppe, Heidrun C., 2003. "The strategic equivalence of rent-seeking, innovation, and patent-race games," Games and Economic Behavior, Elsevier, vol. 44(2), pages 217-226, August.
    14. Encaoua, David & Guellec, Dominique & Martinez, Catalina, 2006. "Patent systems for encouraging innovation: Lessons from economic analysis," Research Policy, Elsevier, vol. 35(9), pages 1423-1440, November.
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