Strategic Delay in a Real Optimna Model of R&D Competition

Helen Weeds

The Warwick Economics Research Paper Series (TWERPS) from University of Warwick, Department of Economics

Abstract: This paper considers irreversible investment in competing research projects with uncertain returns under a winner-takes-all patent system. Uncertainty takes two distinct forms: the technological success of the project is probabilistic, while the economic value of the patent to be won evolves stochastically over time. According to the theory of real options uncertainty generates an option value of delay, but with two competing firms the fear of preemption would appear to undermine this approach. In non-cooperative equilibrium two patterns of investment emerge depending on parameter values.

Keywords: INVESTMENTS; RESEARCH AND DEVELOPMENT; COMPETITION (search for similar items in EconPapers)
JEL-codes: C61 D81 L13 O32 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2000
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Strategic Delay in a Real Options Model of R&D Competition (2002)
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Persistent link: https://EconPapers.repec.org/RePEc:wrk:warwec:576

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