We develop a dynamic duopoly model of R&D competition to improve the quality of a finalgood. The innovation process is … other hand, depends onthe relative magnitudes of the costs of initial innovation and improvements. In particular, aresearch …

innovation. Yet, firms do patent, as indicated by the largenumber of patents that are granted. This paper offers a possible … resolution to this puzzle.It takes a simplified version of a duopoly innovation race, and studies the patenting decisionof an … innovator who has private information about the improvability of her innovation.In this setting, it is shown that a firm may use …