Innovation Races with the Possibility of Failure

Preprint OPEN
Subhasish M. Chowdhury ; Stephen Martin (2011)
  • Subject: innovation, research & development, R&D joint ventures, parallel research projects.
    • jel: jel:L13 | jel:O31 | jel:O38

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.
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