TY  - JOUR
AU  - Grossman,Gene M.
AU  - Shapiro,Carl
TI  - Dynamic R&D Competition
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 1674
PY  - 1988
Y2  - March 1988
UR  - http://www.nber.org/papers/w1674
L1  - http://www.nber.org/papers/w1674.pdf
N1  - Author contact info:
Gene M. Grossman
International Economics Section
Department of Economics
Princeton University
Princeton, NJ 08544
Tel: 609/258-4823
Fax: 609/258-1374
E-Mail: grossman@princeton.edu

Carl Shapiro
Deputy Assistant Attorney General for Economics
U.S. Department of Justice, Antitrust Division
950 Pennsylvania Avenue
Washington, DC 20530
Tel: 202-514-0731
Fax: 202-514-0306
E-Mail: shapiro@haas.berkeley.edu
AB  - We study a simple, two-stage, stochastic patent race involving two firms. We examine the behavior of the participants as they gain the lead or fall behind in the race. We find that the leader engages in R&D more intensively than does the follower, and that both firms intensify their efforts if the follower does catch up with the leader. We also analyze (1) the attractiveness of licensing, whereby the leader shares his results with the follower,(2) a policy of issuing patents for intermediate research results, and (3) the effects of research joint ventures, whereby the firms coordinate their initial research efforts and share their results.
ER  -