The Winner Curse and Social Inefficiency: Double Whammy of R&D Tournament

Arijit Mukherjee, Leonard F.S. Wang

Abstract


In a R&D tournament setting with free entry and knowledge spillover, we show that the society would suffer from excessive entry and the patent holder would endure lower profits than non-patent holders because it bears the cost of commercializing and further technology development, while the other firms are beneficiaries of the spillover effects. This result is instructive to R&D and competition policy.

Keywords


R&D tournament; Excessive entry; Insufficient entry

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References


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DOI: http://dx.doi.org/10.4067/S0718-27242011000400006



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