Noncooperative Oligopoly and Preemptive Innovation without Winner-Take-All

Marion B. Stewart

The Quarterly Journal of Economics, 1983, vol. 98, issue 4, 681-694

Abstract: Earlier models of innovation under oligopolistic rivalry are modified to include a “share parameter†Ã, describing the manner in which profits are divided among rivals when one firm is successful in its search for a valuable resource stock. There is a unique value of à that maximizes expected industry profits, by “guiding†noncooperative oligopolists to choose the profit-maximizing exploration rate. Moreover, setting à at this maximizing valueâ€âwhich always allocates some share of industry profits to the “losers†in the exploration raceâ€âleads to an exploration rate identical to what would be chosen by a jointly managed cartel.

Date: 1983
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