Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/32071
Authors: 
Helm, Carsten
Schöttner, Anja
Year of Publication: 
2005
Series/Report no.: 
Darmstadt discussion papers in economics 154
Abstract: 
We analyze a situation where a principal wants to induce two firms to produce an output, e.g. electricity from renewable energy sources. Firms can undertake non-contractible investments to reduce production cost of the output. Part of these investments spills over and also reduces production cost of the other firm. Comparing a 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.
Subjects: 
R&D spillovers
tournaments
subsidies
moral hazard
JEL: 
Q55
D82
H23
D43
Document Type: 
Working Paper

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