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UID:4448fc105e78e80a68c743ed84b16cc8
CATEGORIES:Seminars
CREATED:20170411T181143
SUMMARY:Lunch Seminar: Hugo Hopenhayn - University of California, Los Angeles
DESCRIPTION;ENCODING=QUOTED-PRINTABLE:On the Direction of Innovation (with Francesco Squintani)\nAbstract:\n How 
 are resources allocated across different R&D areas? We show that under a pl
 ausible set of assumptions, the competitive market allocates excessive inno
 vative efforts into high returns areas, meaning those with higher private (
 and social) payoffs. The underlying source of market failure is the absence
  of property rights on problems to be solved, which are the source of R&D v
 alue. The competitive bias towards high return areas comes three distortion
 s. The first two are familiar in the context of a single innovation line: t
 he cannibalization of returns of competing innovators and duplication costs
 . The third one is new to the innovation literature: excessive entry into h
 igh return areas results as the market does not take into account the futur
 e value of an unsolved problem while a social planner does. Allocation of r
 esources to problem solving leads to a stationary distribution over open pr
 oblems. The distribution of the socially optimal solution stochastically do
 minates that of the competitive equilibrium. A severe form of rent dissipat
 ion occurs in the latter, where the total value of R&D activity equals the 
 value of allocating all resources to the least valuable problem solved.\n
DTSTAMP:20260409T120559Z
DTSTART:20160608T130000Z
DTEND:20160608T140000Z
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TRANSP:OPAQUE
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