A Formal Model of Government Sponsored Research (with Applications to Solar Power Systems)
- Creators
- Balbien, Joel
- Wilde, Louis L.
Abstract
This paper analyzes the behavior of a single firm engaged in R and D for a "sponsor." We are interested in two particular aspects of the interaction between the two agents: (1) the revelation to the sponsor of new information generated by the firm's research, and (2) the firm's choice of research strategy. We show that contractual forms which 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 and D contracts is more likely to do research (1) the lower are the costs of R and 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. Finally, somewhat surprisingly, we find that the amount of information a firm reveals is independent of the costs of R and D.
Additional Information
This research was sponsored by the Jet Propulsion Laboratory under Department of Energy funding from the Solar Thermal Parabolic Dish Program. The views expressed reflect those of the authors only. We would like to thank Steve Lippman and Bill Rogerson for helpful comments on an earlier draft. Published as Balbien, Joel, and Louis L. Wilde. "A dynamic model of research contracting." The Bell Journal of Economics (1982): 107-119.Attached Files
Submitted - sswp339.pdf
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Additional details
- Alternative title
- A Dynamic Model of Research Contracting
- Eprint ID
- 82235
- Resolver ID
- CaltechAUTHORS:20171009-153943053
- JPL
- Department of Energy (DOE)
- Created
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2017-10-09Created from EPrint's datestamp field
- Updated
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2019-10-03Created from EPrint's last_modified field
- Caltech groups
- Social Science Working Papers
- Series Name
- Social Science Working Paper
- Series Volume or Issue Number
- 339