Tuesday, January 23, 2024

Smoothing the Incentives of Patent Examiners

How do you address employees gaming a production quota system? In 2011, the US PTO went from patent examiners having a bi-weekly quota system to adding bonuses tied to eliminating pending examinations on a daily basis. In "Deadlines Versus Continuous Incentives: Evidence from the Patent Office," Frakes and Wasserman examine how patent examiners responded to the new incentives to "clear the inbox." Instead of completing of assignments just before deadlines, there was  a near complete smoothing of task completion ...

leading to large reductions in average examination pendency while resulting in no corresponding reductions in the accuracy of examinations.

This is analogous to "Budget Games: Paying People to Lie" in chapter 22 in which workers have incentives to just meet budget goals. The solution, as the US PTO experience demonstrates, is to find ways to make incentives more linear and less lumpy.

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