Innovation races: An experimental study on strategic research activities

Uwe Cantner (), Andreas Nicklisch () and Torsten Weiland ()

Papers on Strategic Interaction from Max Planck Institute of Economics, Strategic Interaction Group

Abstract: In an experimental setting, firms in a duopoly market engage in a patent tournament and compete for profit-enhancing product advancements. The firms generate income by matching exogenously defined demand preferences with an appropriately composed product portfolio of their own. Demand preferences are initially unknown and first need to be revealed by an investigation of the possible product variations. The better firms approximate demand preferences, the higher their profits. In the ensuing innovation race, firms interact through information spillovers resulting from the imperfect appropriability of research successes. In the random period of the experiment, the continuity of the search process is disturbed by an exogenous shock that affects both the supply and demand side and again spurs research competition. Firms may henceforth explore an enlarged product space in attempting to match the equally modified demand preferences. In our analysis, we explore the behavioral regularities of agents who are engaged in innovation activities. As a key element we test to what extend relative economic performance exercises a stimulating effect on the implementation of innovation and imitation strategies.

Keywords: Innovation; Imitation; Patent Tournament; Trial and Error Process (search for similar items in EconPapers)
JEL-codes: D81 O31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-exp, nep-ino, nep-mic and nep-tid
Date: 2005-07
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Working Paper: Innovation races: An experimental study on strategic research activities (2005)
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