Mechanism Design for R&D Outsourcing with Double-Sided Moral Hazard and Double-Sided Adverse Selection

Abstract:

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It is studied that how to use profit sharing arrangement as an incentive mechanism to stimulate both parties of R&D outsourcing to reveal their private information and commit enough R&D resources or efforts. First, it is proved that the double-sided moral hazard in R&D outsourcing can not be totally prevented under traditional profit-sharing arrangement, namely, fixed, proportional or mixed profit-sharing arrangement. And a new mixed profit sharing arrangement is proposed, which is composed of a fixed transfer payment and allocation proportion, and proved to be able to prevent the double-sided moral hazard, and motivate both parties to reveal their private information and commit enough efforts.

Info:

Periodical:

Advanced Materials Research (Volumes 204-210)

Edited by:

Helen Zhang, Gang Shen and David Jin

Pages:

1569-1574

DOI:

10.4028/www.scientific.net/AMR.204-210.1569

Citation:

X. Ding et al., "Mechanism Design for R&D Outsourcing with Double-Sided Moral Hazard and Double-Sided Adverse Selection", Advanced Materials Research, Vols. 204-210, pp. 1569-1574, 2011

Online since:

February 2011

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Price:

$35.00

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