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Allocative Efficiency and an Incentive Scheme for Research

Anindya Bhattacharya and H Newhouse

Discussion Papers from Department of Economics, University of York

Abstract: In this paper we examine whether an incentive scheme for improving research can have adverse effect on research itself. This work is mainly motivated by the Research Assessment Exercise (RAE) and the Research Excellence Framework (REF) in UK. In a game theoretic framework we show that a scheme like RAE/REF can actually result in deterioration of the over-all research in a country though it may create a few isolated centres of excellence. The central assumption behind this result is that high ability researchers produce positive externalities to their colleagues. We assume these externalities have declining marginal benefit as the number of high ability researchers in a department increases. Because of this declining marginal benefit an incentive scheme like the RAE or REF may lead to over concentration of the high ability researchers in a few departments.

Keywords: RAE; REF; coalitions; strong nash equilibrium (search for similar items in EconPapers)
JEL-codes: C71 C72 I22 I28 (search for similar items in EconPapers)
Date: 2010-01
New Economics Papers: this item is included in nep-sog
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Citations: View citations in EconPapers (4)

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