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Contracting and the Disclosure of Ideas in the Innovation Process

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  • David Martimort
  • Jean-Christophe Poudou
  • Wilfried Sand-Zantman

Abstract

We analyze contracting between an innovator endowed with an idea and a project developer. The innovator has private information about the value of his idea, whereas the developer must exert some non-verifiable effort at the development stage. The developer may also threaten to leave the relationship after being informed on the value of the idea. The equilibrium contracts distort downwards the developer's incentives, but differently so depending on the strength of intellectual property rights (IPR). In particular, with intermediate IPR, only pooling contracts arise, with a limited amount of information being revealed at equilibrium.

Suggested Citation

  • David Martimort & Jean-Christophe Poudou & Wilfried Sand-Zantman, 2011. "Contracting and the Disclosure of Ideas in the Innovation Process," Annals of Economics and Statistics, GENES, issue 101-102, pages 287-305.
  • Handle: RePEc:adr:anecst:y:2011:i:101-102:p:287-305
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