This paper studies the decision of firms to expense or capitalize R&D expenditures. The firm has an incentive to mismatch the benefits and costs of R&D, expensing a larger portion of R&D when the benefits occur in the long-run and capitalizing a larger portion when the benefits occur in the...

This paper introduces a new type of R&D subsidy, which is conditional on the success of the R&D project. In a three-stage model, the government chooses a subsidy(ies) in the first stage; in the second stage, a monopolist chooses R&D effort which determines the size or the probability of success...