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- Title
Investment Secrecy and Competitive R&D.
- Authors
Sengupta, Aditi
- Abstract
Secrecy about investment in research and development (R&D) can promote greater technological change and higher social welfare in competitive industries. In a duopoly where each firm has private information about its actual production technology (or cost) and firms engage in cost-reducing R&D with uncertain outcomes prior to engaging in price competition, the equilibrium outcome when firms do not observe the R&D investment chosen by the rival (investment secrecy) yields higher investment, social welfare, and industry profit compared to the outcome when R&D investment levels of firms are publicly observable. Government intervention to secure disclosure of R&D investments may be counterproductive; trade secret laws that protect privacy of information related to R&D inputs or investment may be helpful.
- Subjects
INVESTMENTS; SECRECY; RESEARCH &; development; SOCIAL services; ECONOMIC competition
- Publication
B.E. Journal of Economic Analysis & Policy, 2016, Vol 16, Issue 3, p1573
- ISSN
2194-6108
- Publication type
Article
- DOI
10.1515/bejeap-2016-0047