Incentives With Transferable Payoff In R&D Policy

Technological progress is central to economical growth and research and development play an important role to technological progress. In free markets, there is underinvestment in R&D sectors for risk and externality, so the government should incentive them. The incentive mechanism make R&D sector's investments achieve the social optimal level. Contracts are built between the government and the R&D sectors, so the modern contract theory can be practicable to analyze the incentives. This thesis uses the imperfect contract theory to analyze the respective applicable domains of transfer mechanism and patent mechanism. It also constructs the optimal R&D transfer incentive with the mechanism design theory, and taking it as reference this thesis compares two government R&D policies: Tax incentives and direct funding. Different mechanism has different applicable domain which is susceptible to many factors such as risk , externality , and so on.