Scarcity of Ideas and R&D Options: Use it, Lose it, or Bank it

Suzanne Scotchmer

Competition Policy Center, Working Paper Series from Competition Policy Center, Institute for Business and Economic Research, UC Berkeley

Abstract: We investigate optimal rewards in an R&D model where substitute ideas for innovation arrive to random recipients at random times. By foregoing investment in a current idea, society as a whole preserves an option to invest in a better idea for the same market niche, but with delay. Because successive ideas may occur to different people, there is a conflict between private and social optimality. We investigate the optimal policy when the social planner learns over time about the arrival rate of ideas, and when private recipients of ideas can bank their ideas for future use. We argue that private incentives to create socially valuable options can be achieved by giving higher rewards where "ideas are scarce."

Keywords: Scarce ideas; imagination; innovation; real options; search models; rewards to R unknown hazard rate, Social and Behavioral Sciences, Business, Technology and Innovation (search for similar items in EconPapers)
Date: 2009-04-15
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

Downloads: (external link)
https://www.escholarship.org/uc/item/2p5543p0.pdf;origin=repeccitec (application/pdf)

Related works:
Working Paper: Scarcity of Ideas and R&D Options: Use it, Lose it or Bank it (2009)
Working Paper: Scarcity of Ideas and R&D Options: Use it, Lose it, or Bank it (2009)
Working Paper: Scarcity of Ideas and R&D Options: Use it, Lose it or Bank it (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cdl:compol:qt2p5543p0

Access Statistics for this paper

More papers in Competition Policy Center, Working Paper Series from Competition Policy Center, Institute for Business and Economic Research, UC Berkeley Contact information at EDIRC.
Bibliographic data for series maintained by Lisa Schiff ().