Rent seeking can be discouraged in the design of the prize -requiring comparative effectiveness trials solves
Heidi Williams, 2010 – Professor of Economics at Dartmouth College and Director of Science Policy at the Institute for Progress. “Incentives, prizes, and innovation” 11/14, https://web.archive.org/web/20170125070713/https://www.nsf.gov/sbe/sosp/tech/williams.pdf //DH
(2) How can rewards under prize mechanisms be calibrated to be roughly in line with the incremental
social benefits of the rewarded innovations, in the absence of a price mechanism? Here, a key
issue is to design metrics that are non-maniputable by firms, thus avoiding distortions that could
otherwise arise due to pure rent seeking. In the case of prize awards for pharmaceutical products,
this could involve the use of comparative effectiveness trials to determine the incremental social
value of a new pharmaceutical innovation, relative to the next best available therapy.