| Author: | Grishagin, V.A. Sergeyev, Ya.D. Silipo, D.B. |
| Title: | Firms' R&D decisions under incomplete information |
| Journal: | European Journal of Operational Research
2001 : MAR, VOL. 129:2, p. 414-433 |
| Index terms: | Companies R&D Decision making Patents Competition Information Rents Models |
| Language: | eng |
| Abstract: | The paper considers a patent race in which firms do not know their relative positions. In this setting, firms that start in the same position proceed at the highest possible speed; and if one firm has an initial advantage it preempts the rival, but at the cost of dissipating a significant part of its monopoly rent. So the paper shows that incomplete information in a patent race leads to rent dissipation. The latter is higher, the higher the value of the prize and the lower the cost of R&D. Thus, for innovations that provide relatively high profits the time to discovery is shortened, but the social losses are likely to be high, due to duplication of effort. |
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