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Allocative Efficiency and an Incentive Scheme for Research

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  • A Bhattacharya
  • H Newhouse

Abstract

In this paper we examine whether an incentive scheme for improving research can have adverse effect on research itself. This work is mainly motivated by the Research Assessment Exercise (RAE) and the Research Excellence Framework (REF) in UK. In a game theoretic framework we show that a scheme like RAE/REF can actually result in deterioration of the over-all research in a country though it may create a few isolated centres of excellence. The central assumption behind this result is that high ability researchers produce positive externalities to their colleagues. We assume these externalities have declining marginal benefit as the number of high ability researchers in a department increases. Because of this declining marginal benefit an incentive scheme like the RAE or REF may lead to over concentration of the high ability researchers in a few departments.

Suggested Citation

  • A Bhattacharya & H Newhouse, 2010. "Allocative Efficiency and an Incentive Scheme for Research," Discussion Papers 10/02, Department of Economics, University of York.
    • Handle: RePEc:yor:yorken:10/02
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    References listed on IDEAS

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    Cited by:

    1. Giovanni Abramo & Ciriaco Andrea D’Angelo & Tindaro Cicero, 2012. "What is the appropriate length of the publication period over which to assess research performance?," Scientometrics, Springer;Akadémiai Kiadó, vol. 93(3), pages 1005-1017, December.
    2. Giovanni Abramo & Tindaro Cicero & Ciriaco Andrea D’Angelo, 2011. "The dangers of performance-based research funding in non-competitive higher education systems," Scientometrics, Springer;Akadémiai Kiadó, vol. 87(3), pages 641-654, June.
    3. Giovanni Abramo & Ciriaco Andrea D’Angelo, 2011. "National-scale research performance assessment at the individual level," Scientometrics, Springer;Akadémiai Kiadó, vol. 86(2), pages 347-364, February.
    4. Manfredi M. A. La Manna, 2008. "Assessing The Assessment Or, The Rae And The Optimal Organization Of University Research," Scottish Journal of Political Economy, Scottish Economic Society, vol. 55(5), pages 637-653, November.

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    More about this item

    Keywords

    RAE; REF; coalitions; strong nash equilibrium;
    All these keywords.

    JEL classification:

    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • I28 - Health, Education, and Welfare - - Education - - - Government Policy
    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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