R&D in a duopoly under incomplete information

Rittwik Chatterjee, Srobonti Chattopadhyay and Tarun Kabiraj

International Journal of Economic Theory, 2019, vol. 15, issue 4, 341-359

Abstract: The availability of information about rivals may have a significant impact on a firm's decision about R&D investment. This paper investigates how the R&D incentive of a firm in a Cournot duopoly may depend on information structures. We show that asymmetric information about the rival's cost reduction may enhance the research incentive of each firm compared to the complete‐information case. However, an additional dimension of asymmetry (e.g. the information about whether the rival has invested in R&D or not) will reduce the R&D incentive unambiguously compared to the one‐dimensional asymmetry case.

Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:bla:ijethy:v:15:y:2019:i:4:p:341-359

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