Portfolio Choice in Research and Development

1984| Working Paper No. 787

Possible distortions in the choice of a mix of research and development projects in the market, where competition is subject to “winner-take-all” payoff structure, are analyzed. Attention is devoted to choices of weights on alternative “knowledge bases” that affect the riskiness and correlation of research and development strategies, under varying assumptions about private or public access to these knowledge bases, and risk attitudes of competitors.

technological change