R&D Contract Choice And The Agent's Decision

R&D is not only an important aspect of firm's running and management, but also what the government agency expects. In the decision process of R&D, Net Cash Flow method is adopted widely. It will takes a long time from original research to finally being put on market, and always companied with lots of uncertain factors, i.e. risk. But profit exists paralleling risk. The decision-maker should design pretty contract in order to encourage firms to carry on R&D, and so the decision-maker itself will gain maximal social welfare.This paper considers auction of this kind of R&D contract, aims that bring the principal maximal profit. And it also gives the agent's decision process and decision result. In one-stage auction, the bidders bid for the sharing rate of profits, if he gains the conract, the agent will carry through R&D, exerts effort . The result of R&D is closely connected with effort level and the scale. It will points out that incentive contract is not desirabe under plausible conditions in R&D contracing.Procurement contract is studied in two-stage auction. The production process consists of two stages. In the first stage, the firms invests in R&D with the outcome of knowledge about the cost. In the second stage, production is carried out and additional effort can be exerted to further reduce costs. It also studies the implementing of the full-information solution. The bidders will trade-off between the profits and winning probability. The principal will design proper auction mechanism to achieve her goal.In the cooperative R&D contract, this paper shows the effects of pervasion parametre on the symmetry and size of the full-information solution. The paper also points out that when the failure rate is strictly decreasing in and is close to 1 or the failure rate is strictly increasing and is close to 0, the full-information solution is anisomerous.