Firm Incentives for Invention Prizes with Multiple Winners
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.
Volume (Year): 32 (2006)
Issue (Month): 1 (Winter)
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