Innovation Races with the Possibility of Failure
Chowdhury, Subhasish M.; Martin, Stephen
The standard innovation race specification assumes a memoryless exponential distribution for the time to success of an R&D project. This specification implies that a project succeeds, eventually, with probability one. We introduce a positive probability that an R&D project fails. With this modified specification, we compare the non-cooperative and cooperative R&D in terms of innovation effort, consumer surplus, and net social welfare.
Publisher: University of Otago
Series number: 1106
Keywords: innovation; research & development; R&D joint ventures; parallel research projects
Research Type: Discussion Paper