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A Model of Grants Distribution: A Screening Approach


  • S. Basov
  • P. Bardsley


In this paper we develop a formal model of the optimal financing of research projects, when the projects differ in both their success probability and the cost of undertaking. We show that in the benchmark case of publicly observable costs the first best can be achieved. If the costs are private information, however, the optimal contract will imply some inefficiency. We provide the first order characterization of the optimal financing scheme in this case and explicitly find it, assuming CARA utility for the institutions

Suggested Citation

  • S. Basov & P. Bardsley, 2004. "A Model of Grants Distribution: A Screening Approach," Econometric Society 2004 Australasian Meetings 252, Econometric Society.
  • Handle: RePEc:ecm:ausm04:252

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    References listed on IDEAS

    1. repec:cup:apsrev:v:77:y:1983:i:02:p:297-322_24 is not listed on IDEAS
    2. Hirshleifer, Jack & Osborne, Evan, 2001. "Truth, Effort, and the Legal Battle," Public Choice, Springer, vol. 108(1-2), pages 169-195, July.
    3. Stergios Skaperdas, 1996. "Contest success functions (*)," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 7(2), pages 283-290.
    4. Chan, Kenneth S. & Mestelman, Stuart, 1988. "Institutions, efficiency and the strategic behaviour of sponsors and bureaus," Journal of Public Economics, Elsevier, vol. 37(1), pages 91-102, October.
    5. Breton, Albert & Wintrobe, Ronald, 1975. "The Equilibrium Size of a Budget-maximizing Bureau: A Note on Niskanen's Theory of Bureaucracy," Journal of Political Economy, University of Chicago Press, vol. 83(1), pages 195-207, February.
    6. Carroll, Kathleen A, 1989. "Industrial Structure and Monopoly Power in the Federal Bureaucracy: An Empirical Analysis," Economic Inquiry, Western Economic Association International, vol. 27(4), pages 683-703, October.
    7. Niskanen, William A, 1975. "Bureaucrats and Politicians," Journal of Law and Economics, University of Chicago Press, vol. 18(3), pages 617-643, December.
    8. Moene, Karl O., 1986. "Types of bureaucratic interaction," Journal of Public Economics, Elsevier, vol. 29(3), pages 333-345, April.
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    Cited by:

    1. Paulo Barelli & Suren Basov & Mauricio Bugarin & Ian King, 2010. "The Inclusiveness of Exclusion," Department of Economics - Working Papers Series 1096, The University of Melbourne.
    2. Paulo Barelli & Suren Basov & Mauricio Bugarin & Ian King, 2012. "The Robustness of Exclusion in Multi-dimensional Screening," RCER Working Papers 571, University of Rochester - Center for Economic Research (RCER).

    More about this item


    multidimensional screening;

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design


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