Optimal Dynamic R&D Programs / Gene M. Grossman, Carl Shapiro.

Format:

Book

Author/Creator:

Grossman, Gene M.

Contributor:

National Bureau of Economic Research.

Shapiro, Carl.

Series:

Working Paper Series (National Bureau of Economic Research) no. w1658.

NBER working paper series no. w1658

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1985.

Summary:

We study the optimal pattern of outlays for a single firm pursuing an R&D program over time. In the deterministic case, (a) the amount of progress required to complete the project is known, and (b) the relationship between outlays and progress is known. In this case, it is optimal to increase effort over time as the project nears completion. Relaxing (a), we find in general a simple, positive relationship between the optimal expenditure rate at any point in time and the (expected) value at that time of the research program. We also show that, for a given level ofexpected difficulty, a riskier project is always preferred to a safe project. Relaxing (b), we find again that research outlays increase as further progressis made.

Notes:

Print version record

July 1985.