Patents versus Markets
Rewards for creating the innovation are offered in two ways, in the patent method the first person to produce the optimal solution gets the entire reward. In the market system each participant is initially given an equal number of shares in each item. The item-shares trade on a market. After the markets close a $1 dividend is paid to each item-share if the item is in the optimal solution, other shares expire worthless. Thus, the price of the item-shares can be thought of as the probability that the item is in the optimal solution. (i.e. is palladium in the optimal solution to the energy problem? If so, it will have a high price.) Dividends are set such that the total reward is about the same in the two treatments. Proposed solutions were also collected in the market setting although the solutions per se were not the basis of any reward.