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Is the market biased against risky R&D?

By David de Meza and T. Klette

Abstract

This article analyzes the riskiness of the R&D strategies chosen by firms engaged in a "winner-takes-all" patent race. In contradiction to Dasgupta and Stiglitz (1980) we show that, when the distribution of invention times is symmetric, the market equilibrium cannot be safer and may be riskier than is socially optimal. We identify the economic reason for the emergence but only if there are few competitors

Topics: HB Economic Theory
Publisher: The RAND Corporation
Year: 1986
OAI identifier: oai:eprints.lse.ac.uk:35578
Provided by: LSE Research Online
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