Screening for breakthroughs

TL;DR

This paper analyzes how to incentivize prompt disclosure of technological breakthroughs through optimal mechanisms, revealing a deadline-based structure and applying findings to unemployment insurance design.

Contribution

It introduces a general model for incentivizing disclosure of private breakthroughs and characterizes the optimal deadline-based mechanisms, including a simple form in key cases.

Findings

Optimal mechanisms have a deadline structure.

Simple deadline form in an important special case.

Graduated deadline structure in general cases.

Abstract

How best to incentivise prompt disclosure? We study this question in a general model in which a technological breakthrough occurs at an uncertain time and is privately observed by an agent, and a principal must incentivise disclosure via her control of a payoff-relevant physical allocation. We uncover a deadline structure of optimal mechanisms: they have a simple deadline form in an important special case, and a graduated deadline structure in general. We apply our results to the design of unemployment insurance schemes.