The Market for R&D Failures

Roy Shalem and Manuel Trajtenberg

No 275729, Foerder Institute for Economic Research Working Papers from Tel-Aviv University > Foerder Institute for Economic Research

Abstract: The informational structure of R&D is characterized by the fact that rms are exposed to more information related to R&D successes of their competitors than to one that reveals their failures. This paper theoretically explores the feasibility of trading knowledge of R&D failures. The implications of constructing a market for R&D failures are substantive, in that they may decrease the effective cost of R&D, shorten the average time to discovery and increase the number of active R&D projects. We present the conditions required for a mutually bene cial trading of R&D failures information between competitors, as well as design trading mechanisms and policy implications that would account for obstacles such as moral hazard, verication, over-investment and private gains.

Keywords: Financial Economics; Marketing (search for similar items in EconPapers)
Pages: 57
Date: 2009-09
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:isfiwp:275729

DOI: 10.22004/ag.econ.275729

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