Insurance and Incentives for Medical Innovation

The Insurance Value of Medical Innovation*

Economists think of medical innovation as a valuable but risky good, producing health benefits but increasing financial risk. This perspective overlooks how innovation can lower physical risks borne by healthy patients facing the prospect of future disease. We present an alternative framework that accounts for all these sources of value and links them to the value of health insurance. We show t...

Incentives for Parallel Innovation

A crucial aspect of the innovation process is the exchange of ideas when several workers or teams explore new work methods in parallel. In such a setting, under-exploration may result as workers attempt to free-ride on the new ideas generated by co-workers. This paper studies optimal incentive schemes for innovation and shows that when workers can learn from each other’s experience, incentives ...

Creating Incentives for Innovation

In an era of fast-paced technological change, innovation has become a business imperative. But it is not easy to make experimentation and risk-taking an integral part of an organization’s business practice. This article describes a model for motivating innovation based on probability theory and experimental evidence. This research indicates that corporate leaders should create a culture that to...

Incentives , prizes , and innovation

Innovation Incentives for Information Goods

Innovations can often be targeted to be more valuable for some consumers than others. This is especially true for digital information goods. We show that the traditional price system not only results in significant deadweight loss, but also provides incorrect incentives to the creators of these innovations. In contrast, we propose and analyze a profit-maximizing mechanism for bundles of digital...