“Incentivizing Innovation: Adding to the Toolkit,” Kremer & Williams (2009)

A nontechnical paper on non-patent methods for incentivization of innovation, with particular regard to medicine. The authors note three particular classes of prizes: ex-ante, where the method fulfills a prespecified condition (i.e., the prize for solving Fermat’s Last Theorem, or the X-Prize), ex-post use, where the method meets some use criterion (i.e., the Advanced Market Commitment whereby donors “top up” purchases of vaccines by third world countries), or ex-post discretion, where the innovation fulfills a rough prespecified condition (i.e., the prize for longitude calculation in the 1700s, or a medical innovation prize fund to pay off developers of new medicine over a period in which the new drug is adopted). Reasonably, the authors feel that movement toward a prize system – and hence away from deadweight loss-inducing patents – should begin with mechanism design experiments that are ex-ante, then move toward ex-post use and ex-post discretion and the empirical result of the earlier tests become clearer.

http://www.nber.org/chapters/c11763.pdf

Advertisement