Scarcity of Ideas and Optimal R&D Policy

The authors thank the editor, Joshua Gans, and three anonymous reviewers for their constructive suggestions. The authors are also indebted to Dan Cao and John Rust for their comments. This paper has also benefited from presentations at Georgetown University, University of Exeter, University of Queensland, and the 22nd Annual International Industrial Organization Conference. This paper supersedes the first part of two working papers by the second and fourth authors entitled “Scarcity of ideas and options to invest in R&D” (Erkal and Scotchmer 2007) and “Scarcity of ideas and R&D options: Use it, lose it or bank it” (Erkal and Scotchmer 2009).

This paper is dedicated to Suzanne Scotchmer.

The views expressed are not purported to reflect those of the Department of Justice.