On the efficiency of the parallel path R&D approach: a stochastic game analysis

This paper explores the economic performance of the parallel path R&D appro ach to product innovation in the absence of patent protection. This is done within the context of a formal model in which competitive innovation is ch aracterized as a dynamic game. The dynamic programming approach used by Ald rich and Morton [Manage. Sci. 21 (1975) 491] in the single firm case is ext ended here to a multi-firm market. Various measures (the expected net prese nt value (ENPV) of total surplus and of profits, and the mean time to first innovation) are evaluated under different market structures. The study inc ludes simulation analysis of the model. (C) 2001 IMACS. Published by Elsevi er Science B.V. All rights reserved.