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A Dynamic Model of Research Contracting

Balbien, Joel and Wilde, Louis L. (1982) A Dynamic Model of Research Contracting. Bell Journal of Economics, 13 (1). pp. 107-119. ISSN 0361-915X. doi:10.2307/3003433.

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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.

Item Type:Article
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URLURL TypeDescription ItemWorking Paper
Alternate Title:A Formal Model of Government Sponsored Research (with Applications to Solar Power Systems)
Additional Information:© 1982 RAND Corporation. 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. The editors of this journal and its referees also provided useful suggestions. Formerly SSWP 339, originally titled: A Formal Model of Government Sponsored Research (with Applications to Solar Power Systems).
Funding AgencyGrant Number
Department of Energy (DOE)UNSPECIFIED
Solar Thermal Parabolic Dish ProgramUNSPECIFIED
Subject Keywords:Unit costs, Contract incentives, Economic models, Risk aversion, Modeling, Technology, Logical proofs, Economic research, Dynamic modeling, Technological innovation
Issue or Number:1
Record Number:CaltechAUTHORS:20171117-155905262
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Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:83319
Deposited By: Jacquelyn Bussone
Deposited On:18 Nov 2017 00:29
Last Modified:15 Nov 2021 19:57

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