Advanced Search
MyIDEAS: Login to save this paper or follow this series

Strategic Delay in a Real Optimna Model of R&D Competition

Contents:

Author Info

  • Weeds, H.

Abstract

This paper considers irreversible investment in competing research projects with uncertain returns under a winner-takes-all patent system. Uncertainty takes two distinct forms: the technological success of the project is probabilistic, while the economic value of the patent to be won evolves stochastically over time. According to the theory of real options uncertainty generates an option value of delay, but with two competing firms the fear of preemption would appear to undermine this approach. In non-cooperative equilibrium two patterns of investment emerge depending on parameter values.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www2.warwick.ac.uk/fac/soc/economics/research/workingpapers/2008/twerp576.pdf
Download Restriction: no

Bibliographic Info

Paper provided by University of Warwick, Department of Economics in its series The Warwick Economics Research Paper Series (TWERPS) with number 576.

as in new window
Length: 39 pages
Date of creation: 2000
Date of revision:
Handle: RePEc:wrk:warwec:576

Contact details of provider:
Postal: CV4 7AL COVENTRY
Phone: +44 (0) 2476 523202
Fax: +44 (0) 2476 523032
Web page: http://www2.warwick.ac.uk/fac/soc/economics/
More information through EDIRC

Related research

Keywords: INVESTMENTS ; RESEARCH AND DEVELOPMENT ; COMPETITION;

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Dutta, P.K. & Rustichini, A., 1991. "A Theory of Stopping Time Games with Applications to Product Innovations and Asset Sales," Discussion Papers, Columbia University, Department of Economics 1991_35, Columbia University, Department of Economics.
  2. Fudenberg, Drew & Tirole, Jean, 1985. "Preemption and Rent Equilization in the Adoption of New Technology," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 52(3), pages 383-401, July.
  3. repec:fth:coluec:549 is not listed on IDEAS
  4. repec:fth:coluec:523 is not listed on IDEAS
  5. Glenn C. Loury, 1976. "Market Structure and Innovation," Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science 256, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  6. Reinganum, Jennifer F., . "On the Diffusion of New Technology: A Game Theoretic Approach," Working Papers, California Institute of Technology, Division of the Humanities and Social Sciences 312, California Institute of Technology, Division of the Humanities and Social Sciences.
  7. Robert S. Pindyck, 1986. "Irreversible Investment, Capacity Choice, and the Value of the Firm," NBER Working Papers 1980, National Bureau of Economic Research, Inc.
  8. McDonald, Robert & Siegel, Daniel, 1986. "The Value of Waiting to Invest," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 101(4), pages 707-27, November.
  9. Avinash Dixit, 1988. "A General Model of R&D Competition and Policy," RAND Journal of Economics, The RAND Corporation, vol. 19(3), pages 317-326, Autumn.
  10. Choi, J.P., 1991. "Dynamic R & D Competition Under "Hazard Rate" Uncertainty," Discussion Papers, Columbia University, Department of Economics 1991_10, Columbia University, Department of Economics.
  11. Partha Dasgupta & Joseph Stiglitz, 1980. "Uncertainty, Industrial Structure, and the Speed of R&D," Bell Journal of Economics, The RAND Corporation, The RAND Corporation, vol. 11(1), pages 1-28, Spring.
  12. Nalin Kulatilaka & Enrico C. Perotti, 1998. "Strategic Growth Options," Management Science, INFORMS, INFORMS, vol. 44(8), pages 1021-1031, August.
  13. Lee, Tom & Wilde, Louis L, 1980. "Market Structure and Innovation: A Reformulation," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 94(2), pages 429-36, March.
  14. Grenadier, Steven R, 1996. " The Strategic Exercise of Options: Development Cascades and Overbuilding in Real Estate Markets," Journal of Finance, American Finance Association, American Finance Association, vol. 51(5), pages 1653-79, December.
  15. Eric Maskin & Jean Tirole, 2010. "A Theory of Dynamic Oligopoly, 1: Overview and Quantity Competition with Large Fixed Costs," Levine's Working Paper Archive 397, David K. Levine.
  16. Bart Lambrecht & William Perraudin, 1996. "Real Options and Preemption," Archive Working Papers, Birkbeck, Department of Economics, Mathematics & Statistics 026, Birkbeck, Department of Economics, Mathematics & Statistics.
  17. Fudenberg, Drew & Gilbert, Richard & Stiglitz, Joseph & Tirole, Jean, 1983. "Preemption, leapfrogging and competition in patent races," European Economic Review, Elsevier, Elsevier, vol. 22(1), pages 3-31, June.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:wrk:warwec:576. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Helen Neal).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.