co production of frugal innovation case of low cost reverse osmosis water filters in india abstract the increased role of market actors in the provision of drinking water has implied a greater salience to issues of affordability with its emphasis of increasing affordability without compromising on quality the idea of frugal innovation holds out particular promise in resource constrained environments in this paper we study the case of low cost household water filters using reverse osmosis ro technology in the indian city of ahmedabad using mixed methods we find the citizen to be an active participant a co producer in the frugal innovation process that allows small scale local entrepreneurs to customize their products and services to the needs and price expectations of their customers this co production process that has been facilitated by the proximity of the user with the local entrepreneur has not only reduced private costs borne by users but also been as successful as their more expensive counterparts in meeting the diverse needs of end users further we find that the context facilitating such service co production is characterized by institutional co production with actions of both the state and citizen creating the demand for innovation around more affordable private solutions while there is much to celebrate in the value created by the frugal innovation we believe the implications of the contested and unregulated water filter technology suggest reasons for caution

schumacher meets schumpeter appropriate technology below the radar innovation and technological change play an important role in poverty reduction through their contribution to growth their use of factors of production their environmental spillovers the social relations associated with production and the characteristics of the products which they produce it was only after the 1960s that these linkages were identified with the recognition that much of global technological progress was directed to meet the needs of the global rich and was best suited to operation in high income environments the development and diffusion of appropriate technologies was an agenda largely pursued by the not for profit appropriate technology movement however with the global diffusion of innovative capabilities and the rapid rise of incomes of the very poor the second bottom billion innovation for the poor and innovation appropriate for production in low wage and poor infrastructure environments has increasingly become an arena for profitable production the very large size of china and india coupled with their growing technological capabilities and the rapid growth of low incomes makes it likely that they will become the dominant sources of innovation for the poor

comparing welfare effects of different regulation schemes an application to the electricity distribution industry abstract we compare the welfare effects of different regulation schemes of electricity distribution utilities the compared regulation schemes are fixed price regulation cost of service regulation menu of cost contingent contracts and simple menu of contracts in our calculations we utilize the information of a firm s potential to improve cost efficiency the firm specific cost information of finnish electricity distribution utilities is obtained by using various stochastic frontier models our basic result is that welfare can be improved by changing the cost of service regulation scheme to the menu of contracts regulation welfare also increases in the case of fixed price regulation and simple menu of contract regulation there is however a significant difference among regulation regimes on how this improved welfare is distributed to consumers and producers

exploring the dynamics of water innovation foundations for water innovation studies the urgent need for innovation to address multifaceted and intertwined water related challenges is becoming increasingly clear acknowledged and responded to with cumulating sources and amounts of funding nevertheless the water sector has been claimed to be less innovative than other sectors this special volume on the dynamics of water innovation is based on the realization that in general there is a striking absence of academic studies on the dynamics of water innovation this sv is therefore designed to lay the foundations for the field of water innovation studies in an effort to integrate the emerging insights together the contributions in this sv capture the current understanding of the dynamics of water innovation and provide insights into how the water innovation process can be fostered the purpose of this introductory article is threefold namely to frame the discussion on water innovation dynamics in order to contextualise the contributions of this sv to provide systematic guidance for studying water innovation dynamics and to suggest the way forward for water innovation studies it captures the extent of the field of water innovation studies with a review of the literature of the last three decades and frames water innovations based on five decades of innovation research and drawing on three areas management strategy and policy we provide an innovation studies taxonomy that consists of four organising dimensions type of innovation stage of innovation level of analysis and measurement this taxonomy enables researchers to study the dynamics of water innovation from different combinations of conceptual and thematic angles drawing on the field of innovation studies in a systematic fashion finally we reflect on the way forward for water innovation studies with suggestions for future research 2017 the authors

simple menus of contracts in cost based procurement and regulation in an influential paper jean jacques laffont and jean tirole 1986 formulated a principal agent model of cost based procurement and regulation and showed that the principal can implement the optimal mechanism by offering the agent a menu consisting of a continuum of linear contracts two related problems with applying this theory in practice have been that the economic logic and the underlying mathematics involved in calculating the optimal menu are quite complex and the principal must be able to specify the agent s entire disutility of effort function in order to calculate the optimal menu as a result the model has not been widely used in practice to either calculate actual incentive contracts or even to develop useful qualitative guidance about the nature of the optimal solution and how it is affected by various economic factors the purpose of this paper is to show that dramatically simpler menus which are easy to understand and calculate and which have lower informational requirements can at least in some cases capture a substantial share of the gains achievable by the fully optimal complex menu in particular this paper considers two item menus where one item is a cost reimbursement contract and the other item is a fixed price contract such menus are called fixed price cost reimbursement fpcr menus for the case where the agent s utility is quadratic and the agent s type is distributed uniformly it is shown that the optimal fpcr menu always captures at least three quarters of the gain that the optimal complex menu achieves where the gain is measured relative to the result of using a cost reimbursement contract this paper s research was originally motivated by a policy issue in defense procurement in the united states the department of defense dod purchases almost all major weapons systems from sole source contractors using contracting methods that essentially amount to using cost reimbursement contracts the best way to understand why dod uses costreimbursement contracting methods is that they perform precisely the function identified in laffont and tirole s principal agent model they guarantee in a situation that amounts to a bilateral monopoly that dod and the firm can reach an agreement i e they guarantee that the agent will always produce the good of course the use of cost reimbursement contracting methods

a note on optimal procurement contracts with limited direct cost inflation abstract laffont and tirole s using cost observation to regulate firms j polit econ 94 1986 614 641 pioneering analysis identifies the optimal procurement contract when the supplier can readily inflate his innate production cost without detection when the buyer has some ability to limit such cost inflation an alternative contract can outperform the contract identified by laffont and tirole the alternative contract induces substantial pooling discontinuous production costs and effort supply and rent that varies non monotonically with innate cost

on countervailing incentives abstract this paper extends and unifies previous work on optimal contracts under countervailing incentives shedding light in particular on the relation between countervailing incentives and pooling inflexible rules our main result is that the nature of the optimal contract depends crucially on whether the agent s utility is quasiconcave or quasiconvex in the private parameter the optimal contract is separated in the former case and it may entail pooling in the latter case journal of economic literature classification number d82

motivating with simple contracts abstract in practice incentive schemes are rarely tailored to the specific characteristics of contracting parties however according to economic theory optimal contracts should be highly dependent on individual conditions we reconcile these observations in the context of a principal agent model with both moral hazard and adverse selection motivating an agent could be increasingly costly to the principal because a more productive agent could also be more able to manipulate the terms of the contract as a result the principal may optimally pool some types by offering a contract with constant transfer and bonus we also explore parameterizations where the optimal contract is fully separating but simple contracts attain a significant portion of the optimal welfare

sustainable development and the challenge of innovation abstract innovation does not automatically lead to societal progress as is implicitly assumed in technology push oriented policies this assumption is an inheritance of the enlightenment i e the belief that science will automatically lead to a better quality of life the strive for sustainable development needs an approach towards innovation that can be characterised as society pull the society has to decide which balance of economical ecological and social goals are to be met society pull can be organised by developing shared perspectives for the future which are inspiring for public and private policy makers and investors in this paper this is worked out as transition management a process approach directing innovation towards sustainable development a crucial aspect of transition management is that innovation is no longer driven by the past but attracted by the future

governance failure rethinking the institutional dimensions of urban water supply to poor households summary this paper applies a conceptual framework of governance failure to an analysis of the institutional dimensions of urban water supply provision to poor households focusing on the case of jakarta data from a household survey archives gis based mapping and interviews are used to document governance failures that create disincentives for utilities to connect poor households and for poor households to connect the paper concludes by suggesting that the debate over the relative merits of public and private provision has diverted attention from the pressing issue of governance reform and by raising the question of whether household provision of networked water supply by monopolistic providers whether public or private is universally feasible given the current water supply policy norms

innovations in the water chain experiences in the netherlands innovations in water chain are discussed based on experiences in the netherlands the available and new technological options as well as their dissemination in the netherlands are presented for the prevailing system with add on technologies elongation and for the emerging separation system with technologies at the source numerous new options are available for both systems but these options are rarely used the low use is explained using economic theories and with practical examples from the netherlands in order to foster innovations the mainstream evolutionary and behavioral theories pinpoint respectively the pricing of common goods broad support of concerted action and support for innovators entry these actions may all be needed experiences with a stakeholder cluster in water management suggest that markets for high value water use invoke innovations and low cost technology adaptations the systematic development of services that foster high value water based activities is recommended

participation constraints in adverse selection models abstract this paper characterizes the optimal contract offered by an uninformed principal to an informed agent when the latter s reservation utility depends on his type the informational rent is nonmonotonic so that interior types may have a vanishing rent or be excluded from trade the paper identifies conditions for the optimal contract to be separating to be nonstochastic and to induce full participation it also discusses the nature of the solution when bunching occurs the results are applied to nonlinear pricing under price cap regulation and bypass competition and to competition in nonlinear pricing journal of economic literature classification numbers d82 d42 d23 d78 l51 l15

cost sharing in health service provision an empirical assessment of cost savings fixed price payments for treatment of patients with a specified diagnosis are widespread in both us medicare and the british nhs even though there are substantial variations in the cost of treatment theory suggests that when there is asymmetric information about those costs total payment can be reduced by cost sharing this paper uses data from medicare to assess the cost savings that might be feasible in practice from cost sharing for diagnosis related groups with low cost variation the calculated cost savings are approximately 7 for those with high cost variation the calculated cost savings are more than 60

simple cost sharing contracts we extend rogerson s 2003 intriguing analysis of the performance of simple procurement contracts to consider settings where the supplier s innate production cost is not necessarily distributed uniformly although the simple contract that rogerson analyzes performs remarkably well when the smaller cost realizations are relatively likely it can perform poorly when the larger cost realizations are relatively likely we show that in all settings under consideration though a fairly simple pair of contracts one that involves linear cost sharing and one that involves full cost reimbursement can always secure more than 73 of the gain achieved with a fully optimal contract

using cost observation to regulate firms the paper emphasizes the use of accounting data in regulatory or procurement contracts when the supplier 1 has superior information about the cost of the project and 2 invests in cost reduction the main result states that under risk neutrality the supplier announces an expected cost and is given an incentive contract linear in cost overruns this optimal contract moves toward a fixed price contract as the announced cost decreases an investment choice is then introduced and the use of a rate of return regulation is studied

a complete solution to a class of principal agent problems with an application to the control of a self managed firm this paper considers a class of principal agent problems which have the following features 1 there is adverse selection because the principal ignores the value of one parameter of the agent s true characteristics 2 leaving aside the information parameter the principal s welfare as well as the agent s welfare depend on two types of variables observable to both of them the first ones possibly multidimensional are called action variable s and the second one which is one dimensional has in general the meaning of a money transfer 3 the principal is a stackelberg leader of the two person game he can commit himself to decision rules which are admissible on informational grounds he optimizes within the adequate class taking into account besides the agent s reaction one constraint which has generally the meaning of an individual rationality constraint and sometimes of a feasibility constraint the optimization is limited to the class of non stochastic mechanisms 4 the problem can also receive an alternative interpretation the principal faces a continuum of agents of unknown characteristics the distribution being known however stylized principal agent problems of this type have often been considered in the economic literature in particular the reader will later be able to recognize that the standard income tax model a la mirrlees 1971 the quality or quantity choice model of the monopolist a la mussa and rosen 1978 or maskin and riley 1982 and the model of government regulation of the private monopolist of baron and myerson 1982 all belong to

procurement contracts theory vs practice abstract laffont and tirole s laffont j tirole j 1986 using cost observation to regulate firms journal of political economy 94 614 641 classic model of procurement under asymmetric information predicts that optimal contracts will always entail some cost sharing and that payments will be a convex function of realized cost in contrast pure cost reimbursement contracts are common in practice as are contracts in which payments are a concave function of realized cost we consider a straightforward extension of laffont and tirole s model that admits optimal contracts of the forms that prevail in practice the extension simply allows the supplier to be able to reduce production costs more easily when costs are initially high than when they are initially low

frugal innovation a review and research agenda abstract this study aims to review the frugal innovation literature in order to understand the main sources theories and overlapping concepts as well as the input success factors impeding factors and output of frugal innovations fis a systematic research approach was applied in this study to synthesize the frugal innovation literature using a standard research review protocol 101 relevant articles were extracted from 11 publication databases we found that even though frugal innovation literature is in an embryonic stage there are over a dozen of definitions of it this study analyses various definition of frugal innovation the fi concept overlaps with a large number of other concepts thus hindering the pace of fi research combining many overlapping concepts into one frugal innovation would help to develop frugal innovation as a well established discipline the theoretical development of frugal innovation discipline is still in an early stage hence theory driven studies are necessary fis are emerging from numerous sources as such exploring it from various levels and units of analysis are important fi requires a significant change in a firm s approach to innovation it plays an important role in sustainability based on the analysis of the extant frugal innovation literature this study points out research agenda

countervailing incentives in agency problems abstract we analyze countervailing incentives in agency problem countervailing incentives exist when the agent has an incentive to understate his private information for some of its realizations and to overstate it for others when countervailing incentives arise pooling generally characterizes the equilibrium contract furthermore performance is distorted both above and below efficient levels in addition the agent s rents generally increase with the realization of his private information over some ranges and decrease over other ranges we demonstate that the creation of countervailing incentives can enhance aggregate welfare

china s regional balanced development based on the investment in power grid infrastructure abstract due to the stark reality of regional development disparities china has to confront the sustainable development challenges brought about by social inequality to compensate for these regional differences in natural resource endowments effective investment in power grid infrastructure pgi and improvement of power grids might prove helpful in reducing poverty and narrowing the development gap this paper constructs a peripheral degree index pdi of power grid to measure the effective distance between electricity delivering areas and receiving regions moreover we discuss how to efficiently locate the investment in pgi and optimize the allocation of limited financial resources the results show investment in pgi has higher marginal benefit for less developed provinces in energy delivering regions and more importantly improvement of the grid infrastructure in central areas which connect energy receiving and delivering regions particularly to improve the grid facilities in the central areas could reduce electricity transmission cost and help to alleviate the railway strain for coal transportation therefore our findings suggest that it is more advisable to locate the investment of power grid infrastructure in the central provinces that are located at strategic conjunctions of the nationwide power grid including shanxi henan hubei and hebei