We consider the stochastic control model with finite time horizon for a mixed duopoly R&D (Research and Development) race between the profit-maximizing private firm and welfare maximizing public firm. In our two-firm stochastic control R&D race model, the stochastic control variable is taken to...

We examine the persistence of monopolies in markets with innovations when the outcome of research is uncertain. We show that for low success probabilities of research, the incumbent can seldom preempt the potential entrant. Then the efficiency effect outweighs the replacement effect. It is vice...