Template-Type: ReDIF-Paper 1.0
Title: Organization of R&D With Two Agents and Principal
Author-Name: Ekaterina Goldfayn
Author-Email: Ekaterina.Goldfayn@uni-bonn.de
Classification-JEL: O31, L23, C72
Keywords: moral hazard, hierarchy, team production, competition, organization of R&D
Abstract: 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.
Note: 
Length: 54
Creation-Date: 2006-02	
Revision-Date: 
File-URL: http://www.wiwi.uni-bonn.de/bgsepapers/bonedp/bgse3_2006.pdf
File-Format: application/pdf
Handle: RePEc:bon:bonedp:bgse3_2006