R&D RACE WITH SWITCHING OPTIONS.

Abstract

In technological and bio-medicine research, firms compete to be the first to make a discovery and obtain the patent. We consider a winner-take-all race. Our main interests concern (i) the initial choices of research methods, i.e., whether firms cluster or separate, (ii) decisions regarding when to switch the R&D method, (iii) when to abandon the race altogether. The analysis is carried out assuming firms’ choices and the state of progress are both observable. Also, after switching from one method, firms cannot return to it at a later date. The research in this thesis can be related to hundreds of pharmaceutical companies’ behavior in the COVID vaccine race.