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A simple model of R&D: An extension of the Dorfman-Steiner theorem

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  • Chang-Yang Lee

Abstract

This paper extends the seminal Dorfman-Steiner (American Economic Review, 44, 826-36, 1954) theorem by putting underlying structures on the determination of market share and on the production of quality or technology. The model developed in this paper yields a demand-pull, technology-push theory of R&D, where the profit-maximizing R&D intensity (i.e., the ratio of R&D expenditure to sales) is determined jointly by consumer characteristics, represented by the elasticities of consumer value with respect to price and quality, and firm-specific technological competence or simply R&D productivity, measured as the R&D elasticity of quality or technological output.

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  • Chang-Yang Lee, 2002. "A simple model of R&D: An extension of the Dorfman-Steiner theorem," Applied Economics Letters, Taylor & Francis Journals, vol. 9(7), pages 449-452.
    • Handle: RePEc:taf:apeclt:v:9:y:2002:i:7:p:449-452
    DOI: 10.1080/13504850110091787
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    Cited by:

    1. Lee, Chang-Yang, 2009. "Do firms in clusters invest in R&D more intensively? Theory and evidence from multi-country data," Research Policy, Elsevier, vol. 38(7), pages 1159-1171, September.
    2. Néstor Duch-Brown & José García-Quevedo & Daniel Montolio, 2011. "The link between public support and private r&d effort: what is the optimal subsidy?," Working Papers 2011/12, Institut d'Economia de Barcelona (IEB).
    3. Néstor Duch-Brown & José García-Quevedo & Daniel Montolio, 2011. "The link between public support and private R&D effort: What is the optimal subsidy?," Working Papers XREAP2011-09, Xarxa de Referència en Economia Aplicada (XREAP), revised Jun 2011.
    4. Xulia Gonzalez & Consuelo Pazo, 2004. "Firms' R&D dilemma: to undertake or not to undertake R&D," Applied Economics Letters, Taylor & Francis Journals, vol. 11(1), pages 55-59.
    5. Chang-Yang Lee, 2003. "Firm Density and Industry R & D Intensity: Theory and Evidence," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 22(2), pages 139-158, March.
    6. Chang-Yang Lee, 2003. "A simple theory and evidence on the determinants of firm R&D," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 12(5), pages 385-395.

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