On Optimal Leader’s Investments Strategy in a Cyclic Model of Innovation Race with Random Inventions Times

Sergey M. Aseev and Masakazu Katsumoto
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Sergey M. Aseev: Steklov Mathematical Institute of RAS, Gubkina 8, 119991 Moscow, Russia
Masakazu Katsumoto: International Institute for Applied Systems Analysis, A-2361 Laxenburg, Austria

Games, 2020, vol. 11, issue 4, 1-21

Abstract: In this paper, we develop a new dynamic model of optimal investments in R&D and manufacturing for a technological leader competing with a large number of identical followers on the market of a technological product. The model is formulated in the form of the infinite time horizon stochastic optimization problem. The evolution of new generations of the product is treated as a Poisson-type cyclic stochastic process. The technology spillovers effect acts as a driving force of technological change. We show that the original probabilistic problem that the leader is faced with can be reduced to a deterministic one. This result makes it possible to perform analytical studies and numerical calculations. Numerical simulations and economic interpretations are presented as well.

Keywords: R& D; stochastic innovation race; technology spillovers; imitation; optimal allocation of resources; dynamic optimization (search for similar items in EconPapers)
JEL-codes: C C7 C70 C71 C72 C73 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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