Abstract
The paper considers a monopoly firm with two possible R & D projects, one improving the product's reliability and the second reducing the customers' costs associated with product failure. The firm must choose one project or the other, and has a fixed budget for R & D expenditures. A condition on parameters is derived which indicates which project should be chosen. Monte Carlo analysis suggests that for the firm's decision-making the most important parameter is a measure of the ambient level of technology. From society's point of view, the most important parameter in determining the effect of the R & D choice on society is the size of the market being served by the firm.
Volume
4
Issue
2
First Page
68
Last Page
77
Rights
© Fort Hays State University
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Recommended Citation
Gretz, Richard T.; Highfill, Jannett; and Scott, Robert C.
(2008)
"R & D: Allocation: Reliability Vs. Customer Cost,"
Journal of Business & Leadership: Research, Practice, and Teaching (2005-2012): Vol. 4:
No.
2, Article 9.
DOI: 10.58809/SNOY6644
Available at:
https://scholars.fhsu.edu/jbl/vol4/iss2/9
Comments
For questions contact ScholarsRepository@fhsu.edu