Given a production function for technical change, this paper seeks to maximize the present discounted value of the difference between its benefits and costs. A model is developed within the context of a program in which an organization attempts to improve the performance of one of its systems subject to an arbitrary fiscal constraint that limits the rate of R&D spending on that system. In more concrete terms, the organization can be viewed as the Air Force engaged in a product-improvement program for one of its jet engines. A fiscal constraint may then be imposed by the Air Force's chief R&D officer or by Congress itself. Predictions of the model are compared with casual observations of behavior and the implications of "austere" budgets are discussed.
Shishko, Robert, An Optimal Control Model of Product Improvement R&D. Santa Monica, CA: RAND Corporation, 1971. https://www.rand.org/pubs/papers/P4668.html.
Shishko, Robert, An Optimal Control Model of Product Improvement R&D. RAND Corporation, P-4668, 1971. As of November 30, 2023: https://www.rand.org/pubs/papers/P4668.html