Setting the Budget for Targeted Research Projects

Alessandro De Chiara () and Elisabetta Iossa
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Alessandro De Chiara: Universitat de Barcelona and Barcelona Economic Analysis Team (BEAT), Avinguda Diagonal 696, 08034, Barcelona, Spain

The B.E. Journal of Economic Analysis & Policy, 2021, vol. 21, issue 3, 1013-1034

Abstract: We consider a funding competition for targeted projects. Potential participants have stochastic opportunity costs, and do not know the number of competitors. The funding agency sets a budget cap indicating the maximum funding that participants may request. We show that raising the budget cap helps to attract more participants but causes an increase in the requested funds. A higher budget cap is optimal when the preferences of researchers and the funding agency are more congruent, competition is lower, targeted projects have larger social value, the cost of public funds is smaller, or bidding preparation costs are lower.

Keywords: award budget; competitive grants; procurement of innovation; project choice; research funding mechanisms; research tournaments; targeted funding (search for similar items in EconPapers)
JEL-codes: D8 L2 O25 O30 O31 O38 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1515/bejeap-2020-0347

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