The Invariance of R&D to the Number of Firms in the Industry
Raaj Kumar Sah
University of Chicago
Joseph E. Stiglitz
Columbia Business School - Finance and Economics; National Bureau of Economic Research (NBER)
NBER Working Paper No. w1798
Thi spaper presents certain remarkably simple results concerning market's allocation to R&D and its comparison to socially efficient allocations. We posit that a firm can undertake more than one project aimed at the same innovation, and consider a product market characterized by Bertrand competition. Among the results we obtain is that the market R&D (that is, the number of projects undertaken, and the effort spent on different projects) is invariant to the number of firms. We also examine the effects of the number of firms on the gains from innovation to consumers, firms, and society, and show, in particular, that the market undertakes less R&D than is socially desirable.
Number of Pages in PDF File: 23working papers series
Date posted: July 16, 2004
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo7 in 0.485 seconds