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Chapter 1 Rent Dissipation in R&D Races

In: The Economics of Innovation

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  • Ulrich Doraszelski

Abstract

The literature on R&D races suggests that noncolluding firms invest excessively in R&D. We show that this result depends critically on the winner-take-all assumption. Although rents continue to be dissipated once the winner-take-all assumption is relaxed because firms in general fail to provide the optimal R&D effort, the mechanisms behind this rent dissipation change with the degree of patent protection. We then illustrate how the patent system can be used to elicit the optimal R&D effort.

Suggested Citation

  • Ulrich Doraszelski, 2008. "Chapter 1 Rent Dissipation in R&D Races," Contributions to Economic Analysis, in: The Economics of Innovation, pages 3-13, Emerald Group Publishing Limited.
    • Handle: RePEc:eme:ceazzz:s0573-8555(08)00201-0
    DOI: 10.1016/S0573-8555(08)00201-0
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