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| Author: | Denicolo, V. Franzoni, L.A. |
| Title: | On the winner-take-all principle in innovation races |
| Journal: | Journal of the European Economic Association
2010 : SEP, VOL. 8:5, p. 1133-1158 |
| Index terms: | economics law industries regulations |
| Freeterms: | research and development |
| Language: | eng |
| Abstract: | This article discusses the optimal allocation of prizes in an innovation race. Should the winner take all, or would it be better if the original inventor shared the market with a number of independent duplicators? Some recent studies in law and economics have argued that the more permissive solution is socially preferable under mild conditions. We re-investigate the issue, arguing that a permissive regime may alter the innovation race into a waiting game, weakening incentives, and may invite socially non-profitable duplicative R&D expenditures. In a model taking into account these effects, the winner-takes-all scheme turns out to be preferable in a variety of circumstances, especially in innovation-centered industries. |
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