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Innovation Races with the Possibility of Failure

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  • Subhasish M. Chowdhury

    ()
    (University of East Anglia)

  • Stephen Martin

    ()
    (Purdue University)

Abstract

The standard innovation race specification assumes a memoryless exponential distribution for the time to success of an R&D project. This specification implies that a project succeeds, eventually, with probability one. We introduce a positive probability that an R&D project fails. With this modified specification, we compare the non-cooperative and cooperative R&D in terms of innovation effort, consumer surplus, and net social welfare.

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File URL: http://www.business.otago.ac.nz/econ/research/discussionpapers/DP_1106.pdf
File Function: This version, 2011
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Bibliographic Info

Paper provided by University of Otago, Department of Economics in its series Working Papers with number 1106.

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Length: 37 pages
Date of creation: Aug 2011
Date of revision: Aug 2011
Handle: RePEc:otg:wpaper:1106

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Related research

Keywords: innovation; research & development; R&D joint ventures; parallel research projects.;

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  1. Jeroen Hinloopen, 1997. "Subsidizing cooperative and noncooperative R&D in duopoly with spillovers," Journal of Economics, Springer, vol. 66(2), pages 151-175, June.
  2. Winter, Sidney G., 1984. "Schumpeterian competition in alternative technological regimes," Journal of Economic Behavior & Organization, Elsevier, vol. 5(3-4), pages 287-320.
  3. Duso, Tomaso & Röller, Lars-Hendrik & Seldeslachts, Jo, 2012. "Collusion through joint R&D: An empirical assessment," DICE Discussion Papers 79, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
  4. Scott,John T., 2005. "Purposive Diversification and Economic Performance," Cambridge Books, Cambridge University Press, number 9780521022583, April.
  5. Suetens, Sigrid, 2008. "Does R&D cooperation facilitate price collusion? An experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 66(3-4), pages 822-836, June.
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Cited by:
  1. Simona Fabrizi & Steffen Lippert, 2011. "Due diligence, research joint ventures, and incentives to innovate," Working Papers 1113, University of Otago, Department of Economics, revised Dec 2011.

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