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

Weeds, Helen (2000) Strategic Delay in a Real Optimna Model of R&D Competition. Working Paper. The Warwick Economics Research Paper Series (TWERPS) 576.

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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.

Item Type: Monograph (Working Paper)
Uncontrolled Keywords: Investments ; Research and Development ; Competition
Subjects: H Social Sciences > HB Economic Theory
Divisions: Faculty of Social Sciences > Economics, Department of
Depositing User: Jim Jamieson
Date Deposited: 17 Jul 2012 23:55
Last Modified: 17 Jul 2012 23:55
URI: http://repository.essex.ac.uk/id/eprint/3060

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