This paper addresses the issue of anticompetitive and collusive practices in a continuous-time real option framework. We extend the symmetrical duopoly under uncertainty model by Dixit and Pindyck (1994), by granting a patent to the first innovator that files an application. The...

This paper analyses collusion by innovative firms and the role of patents in a continuous-time real options framework. A patent-investment race model is formulated in which innovative firms bargain and reach collusive agreements. It is shown that, while collusion always delays innovation, it...