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Firm Incentives for Invention Prizes with Multiple Winners

  • S. Keith Berry

    ()

    (Hendrix College)

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    This paper considers several multiple winner models where firms compete for invention prizes determined by the social planner. The short-run model, with a fixed number of firms, can result in negative expected societal benefit where welfare gains are totally dissipated. In the long-run model, with entry and exit, it is demonstrated that there is always a positive net welfare gain. The final model developed is one where the social planner sets the prize and the number of firms. Under certain conditions that model results in smaller total research expenditures than in the long-run model.

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    File URL: http://college.holycross.edu/RePEc/eej/Archive/Volume32/V32N1P83_95.pdf
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    Article provided by Eastern Economic Association in its journal Eastern Economic Journal.

    Volume (Year): 32 (2006)
    Issue (Month): 1 (Winter)
    Pages: 83-95

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    Handle: RePEc:eej:eeconj:v:32:y:2006:i:1:p:83-95
    Contact details of provider: Postal: c/o Dr. Alexandre Olbrecht, The Anisfield School of Business 205, Ramapo College, 505 Ramapo Valley Road, Ramapo, New Jersey 07430, USA
    Phone: (201) 684-7346
    Web page: http://www.ramapo.edu/eea/journal.html
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    1. 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.
    2. Edward P. Lazear, 1996. "Incentives in Basic Research," NBER Working Papers 5444, National Bureau of Economic Research, Inc.
    3. Nti, Kofi O, 1997. "Comparative Statics of Contests and Rent-Seeking Games," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(1), pages 43-59, February.
    4. Skaperdas, Stergios & Gan, Li, 1995. "Risk Aversion in Contests," Economic Journal, Royal Economic Society, vol. 105(431), pages 951-62, July.
    5. Rosen, Sherwin, 1986. "Prizes and Incentives in Elimination Tournaments," American Economic Review, American Economic Association, vol. 76(4), pages 701-15, September.
    6. Wenders, John T, 1987. "On Perfect Rent Dissipation," American Economic Review, American Economic Association, vol. 77(3), pages 456-59, June.
    7. de Laat, Eric A. A., 1997. "Patents or prizes: Monopolistic R&D and asymmetric information," International Journal of Industrial Organization, Elsevier, vol. 15(3), pages 369-390, May.
    8. 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.
    9. Berry, S Keith, 1993. " Rent-Seeking with Multiple Winners," Public Choice, Springer, vol. 77(2), pages 437-43, October.
    10. Taylor, Curtis R, 1995. "Digging for Golden Carrots: An Analysis of Research Tournaments," American Economic Review, American Economic Association, vol. 85(4), pages 872-90, September.
    11. Lee, Tom & Wilde, Louis L, 1980. "Market Structure and Innovation: A Reformulation," The Quarterly Journal of Economics, MIT Press, vol. 94(2), pages 429-36, March.
    12. Loury, Glenn C, 1979. "Market Structure and Innovation," The Quarterly Journal of Economics, MIT Press, vol. 93(3), pages 395-410, August.
    13. O'Keeffe, Mary & Viscusi, W Kip & Zeckhauser, Richard J, 1984. "Economic Contests: Comparative Reward Schemes," Journal of Labor Economics, University of Chicago Press, vol. 2(1), pages 27-56, January.
    14. Glazer, Amihai & Hassin, Refael, 1988. "Optimal Contests," Economic Inquiry, Western Economic Association International, vol. 26(1), pages 133-43, January.
    15. Baik, Kyung Hwan, 1993. "Effort levels in contests : The public-good prize case," Economics Letters, Elsevier, vol. 41(4), pages 363-367.
    16. William Corcoran, 1984. "Long-run equilibrium and total expenditures in rent-seeking," Public Choice, Springer, vol. 43(1), pages 89-94, January.
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