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Efficient Compensation for Employees? Inventions


  • Kirstein, Roland
  • Will, Birgit E.


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. (88 words)

Suggested Citation

  • Kirstein, Roland & Will, Birgit E., 2003. "Efficient Compensation for Employees? Inventions," CSLE Discussion Paper Series 2003-03, Saarland University, CSLE - Center for the Study of Law and Economics.
  • Handle: RePEc:zbw:csledp:200303

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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


    Moral hazard; hold-up; efficient fixed wage;

    JEL classification:

    • K12 - Law and Economics - - Basic Areas of Law - - - Contract Law
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games


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