Resource Allocation Among Competing Innovators


Many innovative products are designed to satisfy the demand of specific target consumers, and thus the innovators will inevitably compete with each other in the product market. We investigate how a profit-maximizing principal should properly allocate her limited resources to support the innovations of multiple potentially competing innovators. We find that as the available resources increase, the optimal diversification of investment may first increase and then decrease. This interesting non-monotone pattern is driven by a trade-off between the risk of innovation failure and rent dissipation due to competition. The results are robust to incorporating an endogenous profit-sharing rule and costly resources. Using the framework, we also analyze a nonprofit principal seeking to maximize the total number of successful innovations, the probability of at least one innovator succeeding, consumer surplus, and total social welfare.

About the Speaker

Yangguang (Sunny) Huang an Assistant Professor of Economics at the Hong Kong University of Science and Technology. He received his Ph.D. in Economics from the University of Washington in 2016. His research areas are Industrial Organization and Applied Microeconomics. The theme of his research is combining economic models and econometric techniques to study policyoriented topics. His research projects tackle problems in procurement, public resource allocation, corruption, financial development, digital economy, and online markets.

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Related Publications

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