A simple model of R&D: An extension of the Dorfman-Steiner theorem

Chang-Yang Lee ()

Applied Economics Letters, 2002, vol. 9, issue 7, 449-452

Abstract: This paper extends the seminal Dorfman-Steiner (American Economic Review, 44, 826-36, 1954) theorem by putting underlying structures on the determination of market share and on the production of quality or technology. The model developed in this paper yields a demand-pull, technology-push theory of R&D, where the profit-maximizing R&D intensity (i.e., the ratio of R&D expenditure to sales) is determined jointly by consumer characteristics, represented by the elasticities of consumer value with respect to price and quality, and firm-specific technological competence or simply R&D productivity, measured as the R&D elasticity of quality or technological output.

Date: 2002
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Citations: View citations in EconPapers (7)

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DOI: 10.1080/13504850110091787

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