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Another example would be Google's Lunar X prize, and, of course, the X-Prize. I have to admit that I never fully understood how the economics work out for the
by alex_c 18y ago
Another example would be Google's Lunar X prize, and, of course, the X-Prize.
I have to admit that I never fully understood how the economics work out for the teams competing for a prize. Money for the R&D efforts of each team still has to come from somewhere, and only one team wins the prize to cover the costs. If the technology is so valuable, it makes more sense to me to attempt to take it to market rather than compete for a prize: there can be more than one winner in the market, and the potential payoff can be higher than the prize money.
Obviously, this doesn't work if there is no accessible market for the tech, or if the team is motivated by recognition rather than money.
- Shamiq 18y agoNothing is stopping a losing team from taking their product to the market, Think of it as an added incentive to do it now rather than later. Speaking in terms of time-value... We have a cost now, and a benefit in the future. If C> B/((1+r)^n) then a team will not try to design and create this product /* C = Cost, B = Expected Benefit, r is discount rate, n is number of years*/ Now, if we add a prize = P, it is possible that C<= (B+P)/((1+r)^n). Over the spread of many teams, this means that we are subsidizing additional competition to enter into the market by making available this prize. Speaking less pedantically, if we make the prize high enough in addition to whatever rewards a team will get in the open market, then we give the team an incentive to take the gamble. Who knows, maybe you'll just win.