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A Model of Grants Distribution: A Screening Approach

Author

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  • S. Basov
  • P. Bardsley

Abstract

In this paper we develop a formal model of the optimal financing of research projects, when the projects differ in both their success probability and the cost of undertaking. We show that in the benchmark case of publicly observable costs the first best can be achieved. If the costs are private information, however, the optimal contract will imply some inefficiency. We provide the first order characterization of the optimal financing scheme in this case and explicitly find it, assuming CARA utility for the institutions

Suggested Citation

  • S. Basov & P. Bardsley, 2004. "A Model of Grants Distribution: A Screening Approach," Econometric Society 2004 Australasian Meetings 252, Econometric Society.
    • Handle: RePEc:ecm:ausm04:252
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    Cited by:

    1. Paulo Barelli & Suren Basov & Mauricio Bugarin & Ian King, 2010. "The Inclusiveness of Exclusion," Department of Economics - Working Papers Series 1096, The University of Melbourne.
    2. Paulo Barelli & Suren Basov & Mauricio Bugarin & Ian King, 2012. "The Robustness of Exclusion in Multi-dimensional Screening," RCER Working Papers 576, University of Rochester - Center for Economic Research (RCER).

    More about this item

    Keywords

    multidimensional screening;

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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