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Promising the right prize

  • Emeric Henry

    (Département d'économie)

Prizes are often awarded to encourage research on products deemed of vital importance. We present a mechanism which can, in situations where the innovators are better informed about the difficulty of the research, tailor perfectly the expected reward to the expected research costs. The idea is to let the first successful inventor trade off the risk of having a competitor share the reward in exchange for a higher prize. If the goal of the designer is to minimize the prize awarded whilst encouraging innovators to conduct research, such a mechanism achieves the first best.

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Paper provided by Sciences Po in its series Sciences Po publications with number 7758.

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Date of creation: Mar 2010
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Handle: RePEc:spo:wpmain:info:hdl:2441/eu4vqp9ompqllr09iatrhegan
Contact details of provider: Web page: http://www.sciencespo.fr/
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  1. Nancy Gallini & Suzanne Scotchmer, 2003. "Intellectual Property: When is it the Best Incentive System?," Levine's Working Paper Archive 618897000000000532, David K. Levine.
  2. Michele Boldrin & David K Levine, 2008. "Against Intellectual Monopoly," Levine's Bibliography 122247000000002371, UCLA Department of Economics.
  3. Jullien, Bruno, 1997. "Participation Constraints in Adverse Selection Models," IDEI Working Papers 67, Institut d'Économie Industrielle (IDEI), Toulouse.
  4. Glenn C. Loury, 1976. "Market Structure and Innovation," Discussion Papers 256, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  5. Michael Kremer, 1998. "Patent Buyouts: A Mechanism For Encouraging Innovation," The Quarterly Journal of Economics, MIT Press, vol. 113(4), pages 1137-1167, November.
  6. Vincenzo Denicolo & Luigi A. Franzoni, 2010. "On the Winner-Take-All Principle in Innovation Races," Journal of the European Economic Association, MIT Press, vol. 8(5), pages 1133-1158, 09.
  7. Hopenhayn, Hugo A & Mitchell, Matthew F, 2001. "Innovation Variety and Patent Breadth," RAND Journal of Economics, The RAND Corporation, vol. 32(1), pages 152-66, Spring.
  8. 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.
  9. Kremer, Michael R., 1998. "Patent Buyouts: A Mechanism for Encouraging Innovation," Scholarly Articles 3693705, Harvard University Department of Economics.
  10. Ernst R. Berndt & Rachel Glennerster & Michael R. Kremer & Jean Lee & Ruth Levine & Georg Weizsäcker & Heidi Williams, 2007. "Advance market commitments for vaccines against neglected diseases: estimating costs and effectiveness," Health Economics, John Wiley & Sons, Ltd., vol. 16(5), pages 491-511.
  11. repec:ner:sciepo:info:hdl:2441/c8dmi8nm4pdjkuc9g8gk4io12 is not listed on IDEAS
  12. Emeric Henry, 2010. "Runner-up Patents: Is Monopoly Inevitable?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 112(2), pages 417-440, 06.
  13. repec:cup:cbooks:9780521879286 is not listed on IDEAS
  14. Gandal, Neil & Scotchmer, Suzanne, 1993. "Coordinating research through research joint ventures," Journal of Public Economics, Elsevier, vol. 51(2), pages 173-193, June.
  15. Kultti, Klaus & Takalo, Tuomas, 2008. "Optimal fragmentation of intellectual property rights," International Journal of Industrial Organization, Elsevier, vol. 26(1), pages 137-149, January.
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