Article Abstract:
The September 1978 amendment of the Federal Insecticide, Fungicide and Rodenticide Act provides for payments by manufacturers with imitative products to original innovator manufacturers, to defray the original manufacturers' costs associated with product introduction, registration and testing in conformity with Environmental Protection Agency regulations. Such compensatory payments are necessary to encourage innovation, yet overcompensation in this area could create product monopolies. Consequently, a method for devising optimal compensation payment schemes is required; the method offered here models optimal payments to product innovators, based on the Nash solution for cooperative games.
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Article Abstract:
Research presents models that attempt to integrate research and development (R & D) models with technology adoption decision models, since previous research in these areas tends to be mutually exclusive. The integration of the models indicates that (1) increasing R & D costs decreases the likelihood of R & D, and (2) increasing costs of technology adoption and market interest rate increases result in decreasing the likelihood of adopting new technology and decreasing the likelihood of performing R & D. However, in certain situations, increased R & D costs can increase the incentive for adopting new technologies.
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Article Abstract:
Computational errors are presented in the paper 'Economic models for R and D project selection in the presence of project interactions' by Baker and Bryant (1984). The present values shown in Table 3 of their paper are incorrect. Even when correct values are used, it is not demonstrated that ignoring present-value interactions can result in nonoptimal project selections.
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