On contracting for uncertain R&D
Using a two-stage model, this paper studies auctions of research and development (R&D) contracts when the outcome of research is uncertain. The agent is contracted by the principal to invent a new product or a new process. The principal selects the most capable agent through an auction and writes an incentive contract with the winning agent to share risks. The main finding of the paper is that the generally superior incentive contracts might not be desirable under plausible conditions in R&D contracting. In particular, we find that the principal prefers a cost-plus contract in cases of large R&D projects or rising innovation benefits, but would prefer a fixed-price contract when the number of bidders increases. An alternate elasticity interpretation of results holds promise for empirical analysis. Public policy implications are finally discussed. Copyright © 1999 John Wiley & Sons, Ltd.
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
Volume (Year): 20 (1999)
Issue (Month): 2 ()
|Contact details of provider:|| Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/7976|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Bernard Caillaud & Patrick Rey & Roger Guesnerie & Jean Tirole, 1987.
"Government Intervention in Production and Incentives Theory: A Review of Recent Contributions,"
472, Massachusetts Institute of Technology (MIT), Department of Economics.
- B. Caillaud & R. Guesnerie & P. Rey & J. Tirole, 1988. "Government Intervention in Production and Incentives Theory: A Review of Recent Contributions," RAND Journal of Economics, The RAND Corporation, vol. 19(1), pages 1-26, Spring.
- Delbono, Flavio & Denicolo, Vincenzo, 1993.
"Regulating innovative activity : The role of a public firm,"
International Journal of Industrial Organization,
Elsevier, vol. 11(1), pages 35-48, March.
- Flavio Delbono & Vincenzo Denicolo, 1991. "Regulating Innovative Activity: the Role of a Public Firm," Working Papers 117, Dipartimento Scienze Economiche, Universita' di Bologna.
- Jean-Jaques Laffont & Jean Tirole, 1985.
"Auctioning Incentive Contracts,"
403, Massachusetts Institute of Technology (MIT), Department of Economics.
- William P. Rogerson, 1994. "Economic Incentives and the Defense Procurement Process," Journal of Economic Perspectives, American Economic Association, vol. 8(4), pages 65-90, Fall.
- Kamien, Morton I. & Schwartz, Nancy L., 1980. "A generalized hazard rate," Economics Letters, Elsevier, vol. 5(3), pages 245-249.
- Riordan, Michael H & Sappington, David E M, 1987. "Awarding Monopoly Franchises," American Economic Review, American Economic Association, vol. 77(3), pages 375-87, June.
- Morton I. Kamien & Nancy L. Schwartz, 1980. "A Generalized Hazard Rate," Discussion Papers 435, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- James J. Anton & Dennis A. Yao, 1990. "Measuring the effectiveness of competition in defense procurement: A survey of the empirical literature," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 9(1), pages 60-79.
- David Sappington, 1982. "Optimal Regulation of Research and Development under Imperfect Information," Bell Journal of Economics, The RAND Corporation, vol. 13(2), pages 354-368, Autumn.
- R. Preston McAfee & John McMillan, 1986. "Bidding for Contracts: A Principal-Agent Analysis," RAND Journal of Economics, The RAND Corporation, vol. 17(3), pages 326-338, Autumn.
When requesting a correction, please mention this item's handle: RePEc:wly:mgtdec:v:20:y:1999:i:2:p:99-106. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing)or (Christopher F. Baum)
If references are entirely missing, you can add them using this form.