Document Type

Master's Culminating Experience

Publication Date

1992

Abstract

This paper examines two symmetric noncooperative models of innovation: the model by Loury (1979) and the model by Lee and Wilde (1980). In the Loury model, investment in research and development is treated as an "up front" expenditure, while in the Lee and Wilde model the investment in research and development is treated as an ongoing expenditure flow that occurs throughout the research and development process. The effect that rivalry from competing firms has on the research and development investment of a given firm is studied through simulations using the two models. The simulations show that the relationship between research and development investment is negative when using the Loury model, while the relationship is positive when using the Lee and Wilde model.

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