R&D incentives with uncertain probability of success

Chatterjee, Rittwik and Chattopadhyay, Srobonti and Kabiraj, Tarun (2020): R&D incentives with uncertain probability of success.

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: R&D incentives, Duopoly, Incomplete information, Type distribution
• Subjects: D - Microeconomics > D4 - Market Structure, Pricing, and Design > D43 - Oligopoly and Other Forms of Market Imperfection; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D82 - Asymmetric and Private Information ; Mechanism Design; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L13 - Oligopoly and Other Imperfect Markets; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O31 - Innovation and Invention: Processes and Incentives

References

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