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

@article{Chari2012PrizesAP,
  title={Prizes and patents: Using market signals to provide incentives for innovations},
  author={Varadarajan V. Chari and Mikhail Golosov and Aleh Tsyvinski},
  journal={J. Economic Theory},
  year={2012},
  volume={147},
  pages={781-801}
}
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… CONTINUE READING
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