Prizes and patents: Using market signals to provide incentives for innovations

Varadarajan Chari, Mikhail Golosov and Aleh Tsyvinski

Journal of Economic Theory, 2012, vol. 147, issue 2, 781-801

Abstract: We consider environments in which agents other than innovator receive the signals about the quality of innovation. We study whether mechanisms can be found which exploit market information to provide appropriate incentives for innovation. If such mechanisms are used, the innovator has incentives to manipulate market signals. We show that if an innovator cannot manipulate market signals, then the efficient levels of innovation can be uniquely implemented without deadweight losses – for example, by using prizes. Patents are necessary if the innovator can manipulate market signals. For an intermediate case of costly signal manipulation, both patents and prizes may be optimal.

Keywords: Innovations; Mechanism design; Patents; Prizes; Economic growth (search for similar items in EconPapers)
JEL-codes: D04 D82 D86 O31 O34 O4 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (23)

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Related works:
Working Paper: Prizes and Patents: Using Market Signals to Provide Incentives for Innovations (2009)
Working Paper: Prizes and patents: using market signals to provide incentives for innovations (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:147:y:2012:i:2:p:781-801

DOI: 10.1016/j.jet.2011.04.004

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