The Invariance of R&D to the Number of Firms in the Industry
AbstractThi spaper presents certain remarkably simple results concerning market's allocation to R&D and its comparison to socially efficient allocations. We posit that a firm can undertake more than one project aimed at the same innovation, and consider a product market characterized by Bertrand competition. Among the results we obtain is that the market R&D (that is, the number of projects undertaken, and the effort spent on different projects) is invariant to the number of firms. We also examine the effects of the number of firms on the gains from innovation to consumers, firms, and society, and show, in particular, that the market undertakes less R&D than is socially desirable.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 1798.
Date of creation: Jan 1988
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- Raaj Kumar Sah & Joseph E. Stiglitz, 1987. "The Invariance of Market Innovation to the Number of Firms," RAND Journal of Economics, The RAND Corporation, vol. 18(1), pages 98-108, Spring.
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- Letina, Igor, 2013. "The road not taken: competition and the R&D portfolio," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79871, Verein für Socialpolitik / German Economic Association.
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