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Research in energy conversion technologies: Policy instruments and uncertainty

Listed author(s):
  • Straathof,Bas
  • Zon,Adriaan,van

    (MERIT)

In this paper, the effects of uncertainty and of various policy instruments on the lengthand attractiveness of private research projects are studied. Research expenditure can beregained from quasi-rents that are earned by exploiting patents on the fruits of research.The accumulation of knowledge is modeled as a Poisson process. Within the context ofthe model, we show that firms shorten the duration of research projects when uncertaintyin knowledge accumulation increases or when, for example, the validity of patents isprolonged. The underlying mechanisms are due to Jensen™s Inequality and a real-optioneffect. Furthermore, we develop a smooth pasting condition for a class of Poissonprocesses.

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File URL: http://digitalarchive.maastrichtuniversity.nl/fedora/objects/guid:2349faab-d88b-4e6f-bc96-5504b7d6f054/datastreams/ASSET1/content
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Paper provided by Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT) in its series Research Memorandum with number 005.

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Date of creation: 2002
Handle: RePEc:unm:umamer:2002005
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Web page: http://www.maastrichtuniversity.nl/

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  1. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth through Creative Destruction," Econometrica, Econometric Society, vol. 60(2), pages 323-351, March.
  2. Avinash K. Dixit & Robert S. Pindyck, 1994. "Investment under Uncertainty," Economics Books, Princeton University Press, edition 1, number 5474.
  3. Goel, Rajeev K. & Ram, Rati, 2001. "Irreversibility of R&D investment and the adverse effect of uncertainty: Evidence from the OECD countries," Economics Letters, Elsevier, vol. 71(2), pages 287-291, May.
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