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Model of R&D Valuation and the Design of Research Incentives
The authors develop a real options model of research and development (R&D) valuation, which takes into account the uncertainty in the quality of the research output, the time and cost to completion, and the market demand for the R&D output. The model is then applied to study the problem of pharmaceutical under-investment in R&D for vaccines to treat diseases affecting the developing regions of the world.
Geography
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Available for purchase at: http://www.nber.org/papers/W10041