A Dynamic Model of Research Contracting
This article analyzes the behavior of a single firm that is engaged in R&D for a "sponsor." We show that contractual forms that provide good incentives in a static environment may introduce incentive problems in a dynamic setting. More specifically, we show that a firm engaged in a sequence of R&D contracts is more likely to do research: (1) the lower are the costs of R&D, (2) the better is the state of sponsor knowledge, and (3) the longer is the sequence of contracts (given an appropriately high discount factor). We also show that the firm reveals a larger share of its results: (1) the better is the state of sponsor knowledge, (2) the better is the state of private knowledge possessed by the firm, and (3) the shorter is the sequence of contracts.
Year of publication: |
1982
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Authors: | Balbien, Joel ; Wilde, Louis L. |
Published in: |
Bell Journal of Economics. - The RAND Corporation, ISSN 0361-915X. - Vol. 13.1982, 1, p. 107-119
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Publisher: |
The RAND Corporation |
Saved in:
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