Organization of R&D With Two Agents and Principal

Arbeitspapier

In order to deliver an innovation principals employ competing agents in some circumstances, while employing research team in other circumstances. This paper compares various structures of R&D to provide a rational behind this observation. It is assumed, that the principal can employ either one agent, two competing agents or two agents, cooperating in a team. Which of the available structures will be chosen by principal, depends on value of prize in stake, technological benefits of team production and team structure. Due to the positive effect on incentives, competing agents always generate larger profit to the principal, than a single agent. Further, they often perform better than the team, even when the latter has significant technological benefits. However, the performance of the team may be improved, if it is organized as a hierarchy with the team leader (who is responsible for allocation of resources) and his subordinate. The paper provides conditions on parameters, which determine whether the principal should employ a team or competing agents for performing R&D.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Bonn Econ Discussion Papers ; No. 3/2006

Classification and Topics

• Classification: Wirtschaft ; Noncooperative Games ; Organization of Production ; Innovation and Invention: Processes and Incentives
• Subject: moral hazard ; hierarchy ; team production ; competition ; organization of R&D

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Goldfayn, Ekaterina
• Event: Veröffentlichung
• (who): University of Bonn, Bonn Graduate School of Economics (BGSE)
• (where): Bonn
• (when): 2006

Further information

• Handle: http://hdl.handle.net/10419/22948
• Last update: 10.03.2025, 11:44 AM CET