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Title:Subsidizing technological innovations in the presence of R&D spillovers PDF Logo
Authors:Helm, Carsten
Schöttner, Anja
Issue Date: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
Appears in Collections:Darmstadt Discussion Papers in Economics, Inst. f. VWL, TU Darmstadt

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