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A General Model of R&D Competition and Policy

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Author Info
Avinash Dixit

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Abstract

This article constructs a model of R&D with heterogeneous firms. Each firm's probability of success is a function of its sunk and recurrent R&D expenditures. The social gains from an innovation are not fully captured by the successful firm. The comparison of the social optimum and the market equilibrium involves balancing spillover and crowding effects. Pigovian corrective policies, as well as strategic policies for a subset of colluding firms, are discussed.

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File URL: http://links.jstor.org/sici?sici=0741-6261%28198823%2919%3A3%3C317%3AAGMOR%26%3E2.0.CO%3B2-K&origin=repec
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Publisher Info
Article provided by The RAND Corporation in its journal RAND Journal of Economics.

Volume (Year): 19 (1988)
Issue (Month): 3 (Autumn)
Pages: 317-326
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Handle: RePEc:rje:randje:v:19:y:1988:i:autumn:p:317-326

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  1. Weeds, H., 1999. "'Reverse Hysteresis': R&D Investment with Stochastic Innovation," The Warwick Economics Research Paper Series (TWERPS) 578, University of Warwick, Department of Economics. [Downloadable!]
  2. Geoffrey Heal & Howard Kunreuther, 2003. "You Only Die Once: Managing Discrete Interdependent Risks," NBER Working Papers 9885, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  3. Lundborg, Per & Segerstrom, Paul S., 1998. "The Growth and Welfare Effects of International Mass Migration," Working Paper Series 146, Trade Union Institute for Economic Research. [Downloadable!]
    Other versions:
  4. Weeds, H., 2000. "Strategic Delay in a Real Optimna Model of R&D Competition," The Warwick Economics Research Paper Series (TWERPS) 576, University of Warwick, Department of Economics. [Downloadable!]
    Other versions:
  5. Czarnitzki, Dirk & Kraft, Kornelius, 2000. "An empirical test of the asymmetric models on innovative activity : who invests more into R&D - the incumbent or the challenger?," ZEW Discussion Papers 00-10, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
  6. Richard A. Jensen & Marie Thursby, 1996. "Patent Races, Product Standards, and International Competition," NBER Working Papers 3870, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  7. Nathaniel Wilcox, 2004. "Believing in Economic Theory: Sex, Lies, Evidence, Trust and Ideology," Working Papers 2004-06 Classification-, Department of Economics, University of Houston. [Downloadable!]
  8. Robin Cowan, 2002. "On the Number of Firms and the Quantity of Innovation," Economics Bulletin, Economics Bulletin, vol. 12, pages 1-9. [Downloadable!]
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