Project Choice and Risk in R&D
We introduce stochastic R&D in the Hotelling model and show that if the technical risk is sufficiently high, all firms focus on the most valuable market segment. We then endogenize technical risk by allowing firms to choose between a safe and a risky R&D technology. In equilibrium, firms either both target the most attractive market with at least one firm using the risky technology or they choose different niche projects and both apply the safe R&D technology. We show that R&D spillovers lead to more differentiated R&D projects and patent protection to less. Project coordination within a RJV implies more differentiation, and may be welfare-improving.
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- Irmen, Andreas & Thisse, Jacques-Francois, 1998.
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- Andreas IRMEN & Jean-François THISSE, 1996. "Competition in Multi-Characteristics Spaces: Hotelling Was Almost Right," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 9613, Université de Lausanne, Faculté des HEC, DEEP.
- IRMEN, Andreas & THISSE, Jacques-Francois, 1997. "Competition in multi-characteristics spaces: hotelling was almost right," CORE Discussion Papers 1997053, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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- Choi, Jay Pil, 1993. "Cooperative R&D with product market competition," International Journal of Industrial Organization, Elsevier, vol. 11(4), pages 553-571.
- Neven, D. & Thisse, J-F., 1989. "On Quality And Variety Competition," CORE Discussion Papers 1989020, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Kamien, Morton I & Muller, Eitan & Zang, Israel, 1992. "Research Joint Ventures and R&D Cartels," American Economic Review, American Economic Association, vol. 82(5), pages 1293-306, December.
- Duranton, Gilles, 2000. "Cumulative Investment and Spillovers in the Formation of Technological Landscapes," Journal of Industrial Economics, Wiley Blackwell, vol. 48(2), pages 205-13, June.
- d'ASPREMONT, Claude & GABSZEWICZ, Jean J. & THISSE, Jacques-François, .
"On Hotelling's "Stability in competition","
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-385, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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