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Firm's objective function and product and process R&D

  • Saha, Souresh
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    Firms undertake different kinds of R&D activities. They do product R&D (R&D aimed at improving the quality of existing products, and creating new products). They also do process R&D (R&D aimed at lowering the cost of making existing and new products). Moreover, firms often do both product and process R&D simultaneously. As far as the objective of firms is concerned, this need not be limited to profit-maximization only. Rather, firms may have a broader objective, where they care about profits as well as consumer surplus. This paper studies effects of a firm having a general objective function (that takes into consideration both profits and consumer surplus) on its product and process R&D choices, and corresponding implications.

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    Article provided by Elsevier in its journal Economic Modelling.

    Volume (Year): 36 (2014)
    Issue (Month): C ()
    Pages: 484-494

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    Handle: RePEc:eee:ecmode:v:36:y:2014:i:c:p:484-494
    DOI: 10.1016/j.econmod.2013.08.041
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/30411

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