Strategic Considerations in Invention and Innovation; The Case of Natural Resources Revisited

Trond Olsen

Econometrica, 1988, vol. 56, issue 4, 841-49

Abstract: If a resource importing country can commit to the future development of a backstop tec hnology, such a development program can be used strategically to affe ct the pricing policy of a resource supplier. Previous studies have r evealed the interesting possibility that by delaying development of t he substitute, the importing country could benefit from a favorable p roduction response on the part of the exporting country. This paper d emonstrates that this effect can indeed occur, but the set of paramet ers for which it does occur is smaller than previously realized. The intuition behind this effect is further developed. Copyright 1988 by The Econometric Society.

Date: 1988
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