Minimum quality standards and novelty requirements in a one-shot development race
The authors examine the timing and quality of product introduction in an R&D stopping game, where they allow for horizontal and vertical differentiation in the product market. They observe that discontinuous changes in introduction dates can occur as firms' abilities as researchers change. Further, the authors observe differences in the social optimality of entry patterns depending on the underlying research abilities of the firms. Minimum quality standards and novelty requirements can play a role in correcting these suboptimal patterns of entry. The authors find that increasing the novelty requirement does not necessarily increase either the profits or, consequently, the investment levels of the initial innovator, contrary to much of the cumulative innovation literature. When the research abilities of the firms differ, either the high ability firm or the low ability firm may be the first mover. Policy interventions have much more ambiguous welfare effects in this asymmetric case, as they can change the order of entry.
|Date of creation:||2009|
|Contact details of provider:|| Postal: Kiellinie 66, D-24105 Kiel|
Phone: +49 431 8814-1
Fax: +49 431 8814528
Web page: http://www.economics-ejournal.org/
More information through EDIRC
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.:
- Gerard Llobet & Hugo Hopenhayn & Matthew Mitchell, 2003.
"Rewarding Sequential Innovators: Prizes, Patents and Buyouts,"
Levine's Working Paper Archive
618897000000000682, David K. Levine.
- Hugo Hopenhayn & Gerard Llobet & Matthew Mitchell, 2006. "Rewarding Sequential Innovators: Prizes, Patents, and Buyouts," Journal of Political Economy, University of Chicago Press, vol. 114(6), pages 1041-1068, December.
- Llobet, G. & Hopenhayn, H. & Mitchell, M., 2000. "Rewarding Sequential Innovators: Prizes, Patents and Buyouts," Papers 0012, Centro de Estudios Monetarios Y Financieros-.
- Gerard Llobet & Hugo A. Hopenhayn & Matthew F. Mitchell, 2000. "Rewarding sequential innovators: prizes, patents and buyouts," Staff Report 273, Federal Reserve Bank of Minneapolis.
- Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
- Quint, Daniel & Einav, Liran, 2005. "Efficient entry," Economics Letters, Elsevier, vol. 88(2), pages 278-283, August.
- Partha Dasgupta & Joseph Stiglitz, 1980. "Uncertainty, Industrial Structure, and the Speed of R&D," Bell Journal of Economics, The RAND Corporation, vol. 11(1), pages 1-28, Spring.
- Hopenhayn, Hugo A & Mitchell, Matthew F, 2001. "Innovation Variety and Patent Breadth," RAND Journal of Economics, The RAND Corporation, vol. 32(1), pages 152-166, Spring.
- Ted O'Donoghue & Suzanne Scotchmer & Jacques-François Thisse, 1998.
"Patent Breadth, Patent Life, and the Pace of Technological Progress,"
Journal of Economics & Management Strategy,
Wiley Blackwell, vol. 7(1), pages 1-32, 03.
- O'DONOGHUE, Ted & SCOTCHMER, Suzanne & THISSE, Jacques-François, "undated". "Patent breadth, patent life, and the pace of technological progress," CORE Discussion Papers RP 1314, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Crampes, C. & Hollander, A., 1991.
"Duopoly and Quality Standards,"
Cahiers de recherche
9128, Universite de Montreal, Departement de sciences economiques.
- Leland, Hayne E, 1979. "Quacks, Lemons, and Licensing: A Theory of Minimum Quality Standards," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1328-1346, December.
- James Bessen & Eric Maskin, 2006. "Sequential Innovation, Patents, and Innovation," NajEcon Working Paper Reviews 321307000000000021, www.najecon.org.
- Boom, Anette, 1995. "Asymmetric International Minimum Quality Standards and Vertical Differentiation," Journal of Industrial Economics, Wiley Blackwell, vol. 43(1), pages 101-119, March.
- Manski Charles F, 2009. "Adaptive Partial Drug Approval: A Health Policy Proposal," The Economists' Voice, De Gruyter, vol. 6(4), pages 1-5, March.
- Scarpa, Carlo, 1998. "Minimum quality standards with more than two firms1," International Journal of Industrial Organization, Elsevier, vol. 16(5), pages 665-676, September.
- Reinganum, Jennifer F., 1989. "The timing of innovation: Research, development, and diffusion," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 14, pages 849-908 Elsevier.
- Paul Klemperer, 1990.
"How Broad Should the Scope of Patent Protection Be?,"
RAND Journal of Economics,
The RAND Corporation, vol. 21(1), pages 113-130, Spring.
- Klemperer, Paul, 1990. "How Broad Should the Scope of Patent Protection Be?," CEPR Discussion Papers 392, C.E.P.R. Discussion Papers.
- Prajit K. Dutta & Saul Lach & Aldo Rustichini, 1993.
"Better Late Than Early: Vertical Differentiation in the Adoption of a New Technology,"
NBER Working Papers
4473, National Bureau of Economic Research, Inc.
- Dutta, Prajit K & Lach, Saul & Rustichini, Aldo, 1995. "Better Late Than Early: Vertical Differentiation in the Adoption of a New Technology," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 4(4), pages 563-589, Winter.
- Ted O'Donoghue, 1997.
"A Patentability Requirement For Sequential Innovation,"
1185, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Ted O'Donoghue, 1998. "A Patentability Requirement for Sequential Innovation," RAND Journal of Economics, The RAND Corporation, vol. 29(4), pages 654-679, Winter.
- Uri Ronnen, 1991. "Minimum Quality Standards, Fixed Costs, and Competition," RAND Journal of Economics, The RAND Corporation, vol. 22(4), pages 490-504, Winter.
- Cohen, Wesley M & Levinthal, Daniel A, 1989. "Innovation and Learning: The Two Faces of R&D," Economic Journal, Royal Economic Society, vol. 99(397), pages 569-596, September.
- Nancy T. Gallini, 1992. "Patent Policy and Costly Imitation," RAND Journal of Economics, The RAND Corporation, vol. 23(1), pages 52-63, Spring.
- Glenn C. Loury, 1976.
"Market Structure and Innovation,"
256, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Kuhn, Michael, 2007. "Minimum quality standards and market dominance in vertically differentiated duopoly," International Journal of Industrial Organization, Elsevier, vol. 25(2), pages 275-290, April.
- Christopher Harris & John Vickers, 1987. "Racing with Uncertainty," Review of Economic Studies, Oxford University Press, vol. 54(1), pages 1-21.
- Choi, Jay Pil, 1993. "Dynamic R&D Competition, Research Line Diversity, and Intellectual Property Rights," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 2(2), pages 277-297, Summer.
- Beath, John & Katsoulacos, Yannis & Ulph, David, 1987. "Sequential Product Innovation and Industry Evolution," Economic Journal, Royal Economic Society, vol. 97(388a), pages 32-43, Supplemen.
When requesting a correction, please mention this item's handle: RePEc:zbw:ifwedp:200933. 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: (ZBW - German National Library of Economics)
If references are entirely missing, you can add them using this form.