|Title:||Technological Competition, Cumulative Innovation, and Technological Development Schemes|
technological development scheme
|Publisher:||Institute of Economic Research, Kyoto University|
|Journal title:||KIER Discussion Paper|
|Abstract:||This study investigates which technological development schemes are most desirable for technological competition and cumulative innovation, including follow-on innovation, under uncertainty conditions. Technological competition is likely to generate a social overincentive for innovations; it does so for follow-on innovation, especially when the consumer surplus is negligible. This study determines that a contract with a grant-back clause combined with an appropriate profit distribution mitigates social overinvestment in both initial and follow-on innovation; and therefore, improves social welfare. Moreover, this study demonstrates that if a government can specify a particular profit distribution between firms, the socially optimal investment in initial innovation can be realized. Conversely, assuming a significantly positive consumer surplus instead, this study reveals that competition in follow-on innovation creates a higher level of social welfare.|
|Description:||Revised: September 2021|
|Appears in Collections:||KIER Discussion Paper (English)|
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