Innovation Races with the Possibility of Failure
Subhasish M. Chowdhury
innovation, research & development, R&D joint ventures, parallel research projects.
The standard innovation race specification assumes a memoryless exponential distribution for the time to success of an R&D project. This specification implies that a project succeeds, eventually, with probability one. We introduce a positive probability that an R&D project fails. With this modified specification, we compare the non-cooperative and cooperative R&D in terms of innovation effort, consumer surplus, and net social welfare.