 Uncertain innovation with uncertain product durabilityApplied Economics Letters, 2006, vol. 13, issue 13, 829-834 Abstract: This paper adds to two strands of the economics literature, the literature on product durability and on technical change, in a small way by introducing the possibility that an uncertain invention may be exogenously durable. Durability makes otherwise fully appropriable innovation porous. We consider a duopoly where firms maximize the present discounted rewards from innovation that might turn out to be a durable good or a non-durable good. Comparative-static results show that greater appropriability of rewards from the durable good innovation induces the firm to increase its profit-maximizing research spending. The effect of a change in the probability of the durable innovation is shown to depend on the degree of appropriability. The consideration of the effect of changes in the probability of durable innovation is unique to the literature. The effects of change in R&D competition are ambiguous and in line with earlier findings. Two special cases are considered and policy implications discussed. Date: 2006 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:taf:apeclt:v:13:y:2006:i:13:p:829-834 Ordering information: This journal article can be ordered from DOI: 10.1080/13504850500425154 Access Statistics for this article Applied Economics Letters is currently edited by Anita Phillips More articles in Applied Economics Letters from Taylor & Francis Journals |
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