The winner curse and social inefficiency: Double whammy of R&D tournament

Abstract

In a R&D tournament setting with free entry and knowledge spillover, we show that the society would suffer from ex-cessive entry and the patent holder would endure lower profits than non-patent holders because it bears the cost of commercializing and further technology development, while the other firms are beneficiaries of the spillover effects. This result is instructive to R&D and competition policy. © Universidad Alberto Hurtado, Facultad de Economía y Negocios.