Abstract
In Chapter 2, we began the study of technology substitution in a world of perfect certainty. In this chapter, we continue that study by relaxing the assumption of a certain invention date made earlier. More precisely, we assume that after the one-and-for-all R&D capital expenditure K is spent, the desired technological breakthrough, also called invention, might occur at some uncertain time in the future. After invention has occurred, innovation takes place when the new technology is first brought into use. We still retain the hypothesis that all the characteristics of the new technology are known even before the R&D program is started. To keep the exposition less cumbersome, we shall assume that the backstop, one invented, can provide an inexhaustible perfect substitute for the exhaustible resource in question at a known constant unit cost; all the results in this chapter are still valid under a more general specification of the backstop’s production cost.
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© 1994 Springer-Verlag Berlin Heidelberg
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Hung, N.M., Quyen, N.V. (1994). R & D Timing, Innovation and Resource Depletion Under Uncertainty. In: Dynamic Timing Decisions Under Uncertainty. Lecture Notes in Economics and Mathematical Systems, vol 406. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-51508-8_4
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DOI: https://doi.org/10.1007/978-3-642-51508-8_4
Publisher Name: Springer, Berlin, Heidelberg
Print ISBN: 978-3-540-57649-5
Online ISBN: 978-3-642-51508-8
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