Coordinating research through research joint ventures

Neil Gandal*, Suzanne Scotchmer

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

35 Scopus citations

Abstract

In a simple model, we show that a joint venture can implement the rates of investment that maximize joint profit when firms' research abilities are private information. This can be done with budget balance, even though there are participation constraints. There is no conflict between budget balance and participation constraints because firms' payoffs can depend on ex post signals of abilities. The conflict between budget balance and participation constraints is restored when both abilities and rates of investment are unobservable. We give a condition under which the profit-maximizing rates of investment can be implemented if we relax budget balance.

Original languageEnglish
Pages (from-to)173-193
Number of pages21
JournalJournal of Public Economics
Volume51
Issue number2
DOIs
StatePublished - Jun 1993

Funding

FundersFunder number
Hoover Institution
National Science FoundationSES 89 09503, SES 88 09107

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