The aim of the model is to find the optimal set of projects in a way that the ENPV of the portfolio is optimized, complying with all the financial constraints.
Then the ENPV for the portfolio was calculated (Table 3).
Note that the projects present different profiles in terms of key outcomes such as ENPV and the level of risk measured by the probability of obtaining negative values.
The goals pursued with this process were geared towards improving the overall risk and portfolio ENPV.
It can be noticed that the objective functions that maximize the ENPV of the portfolio suggest that the budget allocation should be close for all the projects.
Table 5 shows that when maximizing the average NPV, the efficiency factor of the budget is lower, close to 80%, while the option of maximizing the probability that the portfolio ENPV is greater than zero, improves the efficiency indicator budget to 94.
The explicit reward structure incorporated in the model allows us to calculate what is arguably the most valid measure of economic performance: the ENPV of total surplus, i.
In the absence of fixed costs, extensive sampling of the parameter space revealed a consistent improvement in performance, as measured by the ENPV of total surplus, as competition increased.
Conditions affecting the market's bias in determining the number of firms in zero profit equilibrium (ZPE), vis-a-vis a number of firms that maximize the ENPV of total surplus (i.
However, its effect on the ENPV of total surplus is indeterminate: R&D effort after initial innovation, although hastening the diffusion process, may well be excessive.
Numerical analysis confirms Spence's (1984) conclusion that the possibility of imitation improves economic performance as measured by the ENPV of total surplus, and we found that protection, on its own, is detrimental to performance, so measured.
2) In the absence of fixed costs, economic efficiency, as measured by the ENPV of total surplus, increases monotonically with competition.