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Is the market biased against risky R&D?

de Meza, David and Klette, T. (1986) Is the market biased against risky R&D? RAND Journal of Economics, 17 (1). pp. 133-139. ISSN 0741-6261

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Abstract

This article analyzes the riskiness of the R&D strategies chosen by firms engaged in a "winner-takes-all" patent race. In contradiction to Dasgupta and Stiglitz (1980) we show that, when the distribution of invention times is symmetric, the market equilibrium cannot be safer and may be riskier than is socially optimal. We identify the economic reason for the emergence but only if there are few competitors.

Item Type: Article
Official URL: http://www.rje.org/
Additional Information: © 1986 The RAND journals of economics
Library of Congress subject classification: H Social Sciences > HB Economic Theory
Sets: Research centres and groups > Managerial Economics and Strategy Group
Departments > Management
Collections > Economists Online
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Date Deposited: 14 Apr 2011 14:50
URL: http://eprints.lse.ac.uk/35578/

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