R&D incentives with uncertain probability of success

Rittwik Chatterjee, Srobonti Chattopadhyay and Tarun Kabiraj

MPRA Paper from University Library of Munich, Germany

Abstract: A firm’s decision to invest in R&D depends on a number of factors like availability of funds, extent of R&D spillovers, market structure, and success probability. However, probability of success depends, to a large extent, on factors endogenous to a firm. This means, success probability can be known to the firm undertaking R&D investment, not to the rivals, hence there is incomplete information about probability of success in R&D. There are also uncertainties about rival’s R&D decision and R&D status. In a duopoly we show that there is a non-monotone relation between R&D incentives and the level of information.

Keywords: R&D incentives; Duopoly; Incomplete information; Type distribution (search for similar items in EconPapers)
JEL-codes: D43 D82 L13 O31 (search for similar items in EconPapers)
Date: 2020-01-31
New Economics Papers: this item is included in nep-com, nep-ind and nep-mic
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:98474

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