Scarcity of Ideas and Options to Invest in R&D

Nisvan Erkal and Suzanne Scotchmer

Competition Policy Center, Working Paper Series from Competition Policy Center, Institute for Business and Economic Research, UC Berkeley

Abstract: We consider a model of the innovative environment where there is a distinction between ideas for R&D investments and the investments themselves. We investigate the optimal reward policy and how it depends on whether ideas are scarce or obvious. By foregoing investment in a current idea, society as a whole preserves an option to invest in a better idea for the same market niche, but with delay. Because successive ideas may occur to di¤erent people, there is a con‡ict between private and social optimality. We argue that private incentives to create socially valuable options can be achieved by giving higher rewards where "ideas are scarce." We then explore how rewards should be structured when the value of an innovation comes from its applications, and ideas for the innovation may be more or less scarce than ideas for the applications.

Keywords: Ideas; patents; intellectual property, innovation; options; nonobviousness, JEL Classifications: O34, K00, L00 (search for similar items in EconPapers)
Date: 2007-12-17
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
https://www.escholarship.org/uc/item/4s01d7md.pdf;origin=repeccitec (application/pdf)

Related works:
Working Paper: Scarcity of Ideas and Options to Invest in R&D (2008)
Working Paper: Scarcity of Ideas and Options to Invest in R&D (2007)
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:cdl:compol:qt4s01d7md

Access Statistics for this paper

More papers in Competition Policy Center, Working Paper Series from Competition Policy Center, Institute for Business and Economic Research, UC Berkeley Contact information at EDIRC.
Bibliographic data for series maintained by Lisa Schiff ().