Portfolio Choice in Research and Development

Sudipto Bhattacharya and Dilip Mookherjee

RAND Journal of Economics, 1986, vol. 17, issue 4, 594-605

Abstract: We analyze the effects of a "winner-take-all" patent mechanism on the riskiness of the research strategies chosen by competing firms, as well as on the firms' incentives to duplicate research projects. Nash equilibrium choices are compared with the social optimum in a one-shot, simultaneous-move game in which competitors choose the riskiness or correlation of their research performances. We show that neither society nor firms have any preference for correlation per se, while the divergence between social and privately optimal levels of risk depends on skewness characteristics of the probability distribution over the discovery dates and on levels of risk aversion.

Date: 1986
References: Add references at CitEc
Citations: View citations in EconPapers (63)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Working Paper: Portfolio Choice in Research and Development (1984)
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:rje:randje:v:17:y:1986:i:winter:p:594-605

Ordering information: This journal article can be ordered from
https://editorialexp ... i-bin/rje_online.cgi

Access Statistics for this article

More articles in RAND Journal of Economics from The RAND Corporation
Bibliographic data for series maintained by ().