R&D Competition when firms Choose Variance

Luis Cabral

Journal of Economics & Management Strategy, 2003, vol. 12, issue 1, 139-150

Abstract: I consider an infinite‐period race where players choose between low‐ and high‐variance motion technologies. I provide sufficient conditions under which, in equilibrium, the leader chooses a safe technology and the laggard a risky one, thus formalizing the sports intuition that the laggard has nothing to lose. Various examples and empirical implications are presented.

Date: 2003
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