Large prizes increase competition for the prize – which means more resources are drained on duplicative innovation

b) Socially wasteful R & D and duplicative innovation. Prize advocates cite another problem with using intellectual property to determine the incentives for innovation: the potential for socially wasteful R & D and duplicative innovation. One social cost of offering greater incentives than are necessary to motivate development is a phenomenon known as “patent racing.” Notwithstanding the name, the phenomenon exists in a prize system as well as a patent system.147 It occurs when an excessive incentive leads firms to engage in socially wasteful behavior to capture those excess profits. Prizes and patents are both a reward for successful innovation. When a larger incentive is given than is necessary to motivate an invention, the excess reward creates unnecessary competition between firms to expend resources in ways that, although justifiable for the winning firm, reduce the benefit of the innovation to society as a whole.