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Chapter 1 Rent Dissipation in R&D Races

The Economics of Innovation

ISBN: 978-0-444-53255-8, eISBN: 978-1-84950-537-6

Publication date: 26 July 2008


The literature on R&D races suggests that noncolluding firms invest excessively in R&D. We show that this result depends critically on the winner-take-all assumption. Although rents continue to be dissipated once the winner-take-all assumption is relaxed because firms in general fail to provide the optimal R&D effort, the mechanisms behind this rent dissipation change with the degree of patent protection. We then illustrate how the patent system can be used to elicit the optimal R&D effort.


Doraszelski, U. (2008), "Chapter 1 Rent Dissipation in R&D Races", Cellini, R. and Lambertini, L. (Ed.) The Economics of Innovation (Contributions to Economic Analysis, Vol. 286), Emerald Group Publishing Limited, Leeds, pp. 3-13.



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