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Expenditure patterns for risky R and D projects

Published online by Cambridge University Press:  14 July 2016

Morton I. Kamien  and
Nancy L. Schwartz
Morton I. Kamien
Affiliation:
Carnegie-Mellon University, Pittsburgh
Nancy L. Schwartz
Affiliation:
Carnegie-Mellon University, Pittsburgh
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Summary

In this paper we derive the time pattern of optimal planned expenditures for R and D projects in which the total effort required to complete the research satisfactorily is not known. Theorem 1 summarizes our results under alternative assumptions regarding the behavior of the function governing the supposed probability of completing the R and D satisfactorily with incremental effort. In addition, an easily employed necessary condition for the R and D project to be worthwhile is provided in Theorem 2.

Type
Research Papers
Information
Journal of Applied Probability , Volume 8 , Issue 1 , March 1971 , pp. 60 - 73
Copyright
Copyright © Applied Probability Trust 1971 

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References

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