TY  - JOUR
AU  - Sah,Raaj Kumar
AU  - Stiglitz,Joseph E.
TI  - The Invariance of R&D to the Number of Firms in the Industry
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 1798
PY  - 1988
Y2  - 1988
UR  - http://www.nber.org/papers/w1798
L1  - http://www.nber.org/papers/w1798.pdf
N1  - Author contact info:
Raaj Sah
University of Chicago
1155 East 60th
The Harris School
Chicago, IL  60637
E-Mail: r-sah@uchicago.edu

Joseph E. Stiglitz
Uris Hall, Columbia University
3022 Broadway, Room 814
New York, NY  10027
Tel: 212/854-0671
Fax: 212/662-8474
E-Mail: jes322@columbia.edu
AB  - Thi spaper presents certain remarkably simple results concerning market's allocation to R&D and its comparison to socially efficient allocations. We posit that a firm can undertake more than one project aimed at the same innovation, and consider a product market characterized by Bertrand competition. Among the results we obtain is that the market R&D (that is, the number of projects undertaken, and the effort spent on different projects) is invariant to the number of firms. We also examine the effects of the number of firms on the gains from innovation to consumers, firms, and society, and show, in particular, that the market undertakes less R&D than is socially desirable.
ER  -