Optimal R&D Investment considering the Product Life Cycle

Abstract

In this research, we address an optimal research and development (R&D) investment problem considering the product life cycle. In order to invest the R&D that satisfy the consumer demand, companies must consider the product life cycle. We propose a dynamic model of R&D investment and benefits based on an appropriate consumer demand in the product life cycle. Using the optimal control theory, we present the optimal solution of R&D investment rate and benefits. In addition, we study the behavior of the R&D investment and benefits and the effect of parameters selected in a dynamic model. A case study indicates that the proposed model efficiently explains a real world R&D investment.