Gerlach, Heiko A.; Rønde, Thomas; Stahl, Konrad - C.E.P.R. Discussion Papers - 2002
We endogenize the market risk (at given technical risk) in firms’ R&D decisions by introducing stochastic R&D in the … Hotelling model. It is shown that if the technical risk is sufficiently high, the market risk remains low even if firms pursue … similar projects. This leads firms to focus on the most valuable market segment. We then also endogenize technical risk by …