We study a three-stage, asymmetric duopoly game of R&D rivalry. The stages are: (1) development of an innovation; (2) fixed-fee licensing of the innovation; and (3) sale of the final product. We find that major innovations will not be licensed, but that equally efficient firms will tend to...

This paper discusses firm behavior, market performance, and the public and private institutions that arise in systems markets, i.e., markets where consumers use compatible components together to generate benefits. In such markets, which include communications networks and 'hardware/software'...

We examine the effects of market structure and the internal organization of firms on equilibrium R&D projects. We compare a monopolist’s choice of R&D portfolio to that of a welfare maximizer. We next show that Sah and Stiglitz’s finding that the market portfolio of R&D is...