The purpose of this paper is to propose a system for regularly offered government-sponsored technology prizes. Such prizes would preserve the incentive to invent without the barriers to entry that come with the patent system. This is of particular interest to entrepreneurs as they lack the patent portfolio that incumbent firms can leverage into derivative technology.
After reviewing various efficiency concerns with the patent system, the author describes how technology prizes could work alongside the patent system. Such prizes are best when the sponsor can capture as much of the technology spillover as possible – i.e. through a government agency. This paper provides a framework for a practical prize structure while paying special attention to combating the logistical and public choice concerns of creating a prize.
This paper focuses on two methods to prevent inefficiency in government-sponsored prize: truth-bonding and information markets. Each mechanism helps combat different kinds of problems. Various complications to this system are explored and addressed.
The paper suggests that an efficient prize system is a possible policy and, if implemented, would embolden technology-focused entrepreneurship and other subsequent technological development.
While previous work has noted the benefits of technology prizes over patents, few attempts have been made to outline an incentive-compatible system for doing so. This paper is the first of its kind to propose a practical and efficient government-sponsored prize system.
