A welfare analysis of innovation in R&D markets

Abstract

Analyses the economic efficiency of innovation under different market conditions within the context of a formal model that represents competitive innovation as the closed loop solution of a dynamic stochastic game in the spirit of Reinganum’s analysis. Goes beyond Reingnaum’s model in its explicit treatment of the product market (following Spence), which permits a consistent analysis of competitive innovation in the absence of patent protection. Measures efficiency by the expected net present value of total surplus, and studies the effect on it of competitive structure, elasticity of demand, fixed costs, spillovers and subsidies.

Citation

Justman, M. and Mehrez, A. (1996), "A welfare analysis of innovation in R&D markets", International Journal of Social Economics, Vol. 23 No. 2, pp. 52-65. https://doi.org/10.1108/03068299610110905