Relative Performance and R&D Competition

Toshihiro Matsumura, Noriaki Matsushima and Susumu Cato

ISER Discussion Paper from Institute of Social and Economic Research, Osaka University

Abstract: This paper formulates a duopoly model in which firms care about relative profits as well as their own profits. Our purpose is to investigate the relationship between the weight of relative performance and R&D expenditure. We find a non-monotone relationship between the weight of relative performance in their objectives and their R&D levels. Both highly reciprocal (altruism) and negative reciprocal attitudes yield high levels of R&D, while the intermediate situations yield low levels of R&D.

New Economics Papers: this item is included in nep-com, nep-cse, nep-eff, nep-ind, nep-ino, nep-ipr, nep-sbm and nep-tid
Date: 2009-08
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Persistent link: http://EconPapers.repec.org/RePEc:dpr:wpaper:0752

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