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Races of Research and Development between Firms with Different Incentives to Innovate

Author

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  • Flavio DELBONO

    (Università di Verona)

  • Vincenzo DENICOLÒ

    (Università di Parma)

Abstract

In this paper we study a one-shot game of R & D between two firms which differ in their incentives to innovate. We analyse this problem when the R & D technology displays smoothly decreasing returns as well as when increasing returns in the form of indivisibilities prevail. In the first case we show that the magnitude of the ratio between the discount rate and the productivity of R & D expenditure may be a critical parameter in ranking firms' probabilities of winning the race. In the second case, we prove that the firm with the higher profit incentive invests in R & D at least as much as the firm with the higher competitive threat. We then apply these results to a homogeneous duopoly under Bertrand or Cournot competition in the product market.

Suggested Citation

  • Flavio DELBONO & Vincenzo DENICOLÒ, 1991. "Races of Research and Development between Firms with Different Incentives to Innovate," Discussion Papers (REL - Recherches Economiques de Louvain) 1991021, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    • Handle: RePEc:ctl:louvre:1991021
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    Cited by:

    1. Naseem, Anwar & Oehmke, James F., 2002. "Should The Public Sector Conduct Genomics R&D?," 2002 Annual meeting, July 28-31, Long Beach, CA 19842, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    2. L. Lambertini & F. Lotti & E. Santarelli, 2000. "Innovative Output, Infra-Industry Spilloves, and R&D Cooperation: Theory and Evidence," Working Papers 371, Dipartimento Scienze Economiche, Universita' di Bologna.

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