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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)

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Paper provided by Saarland University, CSLE - Center for the Study of Law and Economics in its series CSLE Discussion Paper Series with number 2003-03.

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Date of creation: 2003
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Handle: RePEc:zbw:csledp:200303
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  1. Lanjouw, Jean O & Pakes, Ariel & Putnam, Jonathan, 1998. "How to Count Patents and Value Intellectual Property: The Uses of Patent Renewal and Application Data," Journal of Industrial Economics, Wiley Blackwell, vol. 46(4), pages 405-32, December.
  2. Nancy Gallini & Suzanne Scotchmer, 2003. "Intellectual Property: When is it the Best Incentive System?," Levine's Working Paper Archive 618897000000000532, David K. Levine.
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  8. Barbara J. Spencer & James A. Brander, 1982. "Strategic Commitment with R&D: The Symmetric Case," Working Papers 516, Queen's University, Department of Economics.
  9. Inderst, Roman, 2002. "Contract design and bargaining power," Economics Letters, Elsevier, vol. 74(2), pages 171-176, January.
  10. Bengt Holmstrom, 1982. "Moral Hazard in Teams," Bell Journal of Economics, The RAND Corporation, vol. 13(2), pages 324-340, Autumn.
  11. Suzanne Scotchmer, 1991. "Standing on the Shoulders of Giants: Cumulative Research and the Patent Law," Journal of Economic Perspectives, American Economic Association, vol. 5(1), pages 29-41, Winter.
  12. Rebecca S. Eisenberg, 2004. "Reexamining Drug Regulation from the Perspective of Innovation Policy," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 160(1), pages 126-, March.
  13. Eric Rasmusen, 1987. "Moral Hazard in Risk-Averse Teams," RAND Journal of Economics, The RAND Corporation, vol. 18(3), pages 428-435, Autumn.
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  16. Strausz, Roland, 1999. "Efficiency in Sequential Partnerships," Journal of Economic Theory, Elsevier, vol. 85(1), pages 140-156, March.
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