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Promising the right prize

Author

Listed:
  • Emeric Henry

    (Département d'économie)

Abstract

Prizes are often awarded to encourage research on products deemed of vital importance. We present a mechanism which can, in situations where the innovators are better informed about the difficulty of the research, tailor perfectly the expected reward to the expected research costs. The idea is to let the first successful inventor trade off the risk of having a competitor share the reward in exchange for a higher prize. If the goal of the designer is to minimize the prize awarded whilst encouraging innovators to conduct research, such a mechanism achieves the first best.

Suggested Citation

  • Emeric Henry, 2010. "Promising the right prize," Sciences Po publications 7758, Sciences Po.
    • Handle: RePEc:spo:wpmain:info:hdl:2441/eu4vqp9ompqllr09iatrhegan
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    References listed on IDEAS

    as
    1. Nancy Gallini & Suzanne Scotchmer, 2002. "Intellectual Property: When Is It the Best Incentive System?," NBER Chapters, in: Innovation Policy and the Economy, Volume 2, pages 51-78, National Bureau of Economic Research, Inc.
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    9. Emeric Henry, 2010. "Runner‐up Patents: Is Monopoly Inevitable?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 112(2), pages 417-440, June.
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    Cited by:

    1. Mitchell, Matthew & Zhang, Yuzhe, 2012. "Shared Rights and Technological Progress," MPRA Paper 36537, University Library of Munich, Germany.
    2. Matthew Mitchell & Yuzhe Zhang, 2015. "Shared Patent Rights And Technological Progress," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 56(1), pages 95-132, February.

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    More about this item

    Keywords

    innovation race; market commitment mechanism; mechanism design; prizes and sorting;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy

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