Speaker: Dr Nisvan Erkal
Affiliation: The University of Melbourne
Location: Room S402, Social Sciences Building (#24), UQ St Lucia Campus.
Abstract
We consider a model of innovation which distinguishes between ideas and innovations, and investigate how the optimal reward structure is shaped by the scarcity of ideas. Substitute ideas for innovation in the model arrive to random recipients at random times. By foregoing investment in a current idea, society preserves an option to invest in a better idea for the same market niche but with delay. Because successive ideas may occur to different people, there is a conflict between private and social optimality. The social planner does not observe the arrival of ideas and learns over time about the arrival rate of ideas. We represent the social planner’s beliefs using a general continuous density and illustrate that the evolution of beliefs can be tracked by the cumulative hazard function. The reward set by the social planner serves a dual purpose: learning about the arrival rate of ideas and trading off lower delays against lower cost ideas. We show that private incentives to create socially valuable options can be improved by giving higher rewards where ‘ideas are scarce.’
About the presenter's meeting
If you would like to meet with Dr Erkal, contact Dr Zachary Breig
About School Seminar Series
The School of Economics General Seminar Series is held on Fridays. These are in-person and presented by a range of guest researchers from around Australia and internationally.