Experimentation in Dynamic R&D Competition

Anastasios Dosis and Abhinay Muthoo

The Warwick Economics Research Paper Series (TWERPS) from University of Warwick, Department of Economics

Abstract: We study a two-stage, winner-takes-all, R&D race, in which, at the outset, firms are uncertain regarding the viability of the project. Learning through experimentation introduces a bilateral (dynamic) feedback mechanism. For relatively low-value products,the equilibrium stopping time coincides with the socially efficient stopping time although firms might experiment excessively inequilibrium; forrelatively high-value products, firms might reduce experimentation and stop rather prematurely due to the fundamental free-riding effect. Perhaps surprisingly, a decrease in the value of the product can spur experimentation.

Keywords: Experimentation; learning; dynamic R&D competition; inefficiency (search for similar items in EconPapers)
JEL-codes: C73 D83 O31 O32 (search for similar items in EconPapers)
Date: 2019
New Economics Papers: this item is included in nep-com, nep-exp, nep-gth, nep-ino and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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https://warwick.ac.uk/fac/soc/economics/research/w ... werp_1214_muthoo.pdf

Related works:
Working Paper: Experimentation in Dynamic R&D Competition (2019)
Working Paper: Experimentation in Dynamic R&D Competition (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:wrk:warwec:1214

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