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Efficient Compensation for Employees’ Inventions

Author

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  • Roland Kirstein

    (University of Saarland)

  • Birgit Will

    (University of Saarland)

Abstract

We analyze the legal reform concerning employees' inventions in Germany. Using a simple principal-agent model, we derive a unique efficient payment scheme: a bonus which is contingent on the project value. We demonstrate that the old German law creates inefficient incentives. However, the new law concerning university employees and the pending reform proposal concerning other employees also fail to implement first-best incentives. With suboptimal incentives to spend effort on inventions, the government's goal, an increase in the number of patents, is likely to be missed.

Suggested Citation

  • Roland Kirstein & Birgit Will, "undated". "Efficient Compensation for Employees’ Inventions," German Working Papers in Law and Economics 2004-1-1080, Berkeley Electronic Press.
  • Handle: RePEc:bep:dewple:2004-1-1080
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    References listed on IDEAS

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    Cited by:

    1. Roland Kirstein, 2006. "Blair, R. D., and Cotter, T. F.: Intellectual Property: Economic and Legal Dimensions of Rights and Remedies," Journal of Economics, Springer, vol. 89(1), pages 90-93, October.

    More about this item

    Keywords

    Moral hazard; hold-up; efficient fixed wage;

    JEL classification:

    • K - Law and Economics
    • J - Labor and Demographic Economics
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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