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Subsidizing Technological Innovations in the Presence of R&D Spillovers

Helm, Carsten and Schöttner, Anja (2005):
Subsidizing Technological Innovations in the Presence of R&D Spillovers.
Darmstadt, In: Darmstadt Discussion Papers in Economics, [Online-Edition: http://econstor.eu/bitstream/10419/32071/1/504360655.PDF],
[Report]

Abstract

We analyze a situation where a principal wants to induce firms to produce an output, e.g. electricity from renewable energy sources. Firms can undertake non-contractible investments to reduce production costs of the output. Parts of these investments spills over and also reduce production costs of the other firm. Comparing the general price subsidy and an innovation tournament, we find that the principal's expected cost of implementing a given expected output are always higher under the tournament, even though this scheme may lead to more innovation.

Item Type: Report
Erschienen: 2005
Creators: Helm, Carsten and Schöttner, Anja
Title: Subsidizing Technological Innovations in the Presence of R&D Spillovers
Language: English
Abstract:

We analyze a situation where a principal wants to induce firms to produce an output, e.g. electricity from renewable energy sources. Firms can undertake non-contractible investments to reduce production costs of the output. Parts of these investments spills over and also reduce production costs of the other firm. Comparing the general price subsidy and an innovation tournament, we find that the principal's expected cost of implementing a given expected output are always higher under the tournament, even though this scheme may lead to more innovation.

Series Name: Darmstadt Discussion Papers in Economics
Volume: 154
Place of Publication: Darmstadt
Uncontrolled Keywords: R&D spillovers, tournaments, subsidies, moral hazard
Divisions: 01 Department of Law and Economics
01 Department of Law and Economics > Volkswirtschaftliche Fachgebiete
01 Department of Law and Economics > Volkswirtschaftliche Fachgebiete > Angewandte Mikroökonomik und Institutionenökonomik
Date Deposited: 22 Oct 2009 11:42
Official URL: http://econstor.eu/bitstream/10419/32071/1/504360655.PDF
Additional Information:

JEL - Classification : Q55, D82, H23, D43

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