| This dissertation consists of two essays, each an application of developments in incentive theory to important questions of policy interest. The first essay analyzes how university patents and potential competition in product market influence university-industry collaboration for technology transfer. First, I consider a monopoly framework and focus on identifying factors---other than competition---that may prevent technology transfer. A firm may not collaborate for technology transfer because it finds it cheaper to wait until invention's diffusion and develop the product in-house. Technology transfer may also fail due to a disagreement about potential product's profitability. In both these situations university patents can encourage collaboration by making (a) waiting period longer for the firm, and (b) refusal to license relatively unattractive to the university. However, the impact on licensing can also be negative, especially when patent length is very large. Also, even when patents encourage transfer, the welfare may decrease. Second, I consider a duopoly framework to analyze how threat of product market competition affects technology transfer. This case suggests a natural setting in which truthful revelation is not optimal and I show how one can solve for the optimal contract in such a setting. Contrary to the widespread belief, competition can encourage collaboration due to information revelation and presence of signaling gains---licensing allows the collaborating firm to send signals which discourage the competitor from investing.; The second essay studies the design of optimal contract in a procurement setting where quality is imperfectly observable and verifiable---its precise level cannot be determined; one can only investigate (with error) whether it is below a certain reference level. The focus is on the optimal relationship between contracted quality and 'desired' quality. The former serves as an important instrument in efficiently inducing any given level of the latter. With socially costly and unlimited penalty, circumstances in which it is optimal to contract for a lower quality than the desired quality are likely to prevail. With limited liability, however, this may not be feasible and one may have to contract for a higher quality. The results have important implications for the problem of setting legal care standards. |
