Scarcity of Ideas and R&D Options: Use it, Lose it or Bank it / Nisvan Erkal, Suzanne Scotchmer.

Format:

Book

Author/Creator:

Erkal, Nisvan.

Contributor:

National Bureau of Economic Research.

Scotchmer, Suzanne.

Series:

Working Paper Series (National Bureau of Economic Research) no. w14940.

NBER working paper series no. w14940

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Scarcity of Ideas and R&D Options

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2009.

Summary:

We investigate rewards to R&D in a model where substitute ideas for innovation arrive to random recipients at random times. By foregoing investment in a current idea, society as a whole preserves an option to invest in a better idea for the same market niche, but with delay. Because successive ideas may occur to different people, there is a conflict between private and social optimality. We characterize the welfare-maximizing reward structure when the social planner learns over time about the arrival rate of ideas, and when private recipients of ideas can bank their ideas for future use. We argue that private incentives to create socially valuable options can be achieved by giving higher rewards where "ideas are scarce."

Notes:

Print version record

May 2009.