Project Choice and Risk in R&D
Thomas Rønde and
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Thomas Rønde: Institute of Economics, University of Copenhagen
Konrad Stahl: University of Mannheim
No 2004-01, CIE Discussion Papers from University of Copenhagen. Department of Economics. Centre for Industrial Economics
We introduce stochastic R&D in the Hotelling model and show that if the technical risk is sufficiently high, all firms focus on the most valuable market segment. We then endogenize technical risk by allowing firms to choose between a safe and a risky R&D technology. In equilibrium, firms either both target the most attractive market with at least one firm using the risky technology or they choose different niche projects and both apply the safe R&D technology. We show that R&D spillovers lead to more differentiated R&D projects and patent protection to less. Project coordination within a RJV implies more differentiation, and may be welfare-improving.
Keywords: technical risk; R&D project choice; technological spillovers; research joint ventures (search for similar items in EconPapers)
JEL-codes: D81 L13 O32 (search for similar items in EconPapers)
Pages: 32 pages
New Economics Papers: this item is included in nep-ino and nep-mic
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Journal Article: PROJECT CHOICE AND RISK IN R&D* (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:kud:kuieci:2004-01
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