Marco Ottaviani, Bocconi University

"Resource Allocation across Fields: Proportionality, Demand Relativity, and Benchmarking"

Abstract: Some of the world’s largest research funding agencies allocate funds to different fields in proportion to the share of applications received in each field, thus equalizing the success rate across fields. Casting the problem in a simple supply and demand framework, we characterize the equilibrium acceptance standard and the resulting amount of applications when submissions are costly. We show that in all stable equilibria an increase in the accuracy of evaluation in a field reduces applications in that field. Multiple equilibria can result when the distribution of types does not have increasing hazard rate. Fields have perverse incentives to reduce the accuracy of evaluation in order to increase the number of successful applications in their field. Benchmarking current merit scores with respect to previous rounds - a practice introduced at the National Institutes of Health in 1988 - generates virtuous incentives to step up the accuracy of the evaluation.

Contact person: Peter Norman Sørensen