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Understanding Perpetual R&D Races

Yves Breitmoser (), Jonathan Tan and Daniel Zizzo

No 08-22, Working Papers from Centre for Competition Policy, University of East Anglia

Abstract: This paper presents an experimental study of dynamic indefinite horizon R and D races with uncertainty and multiple prizes. The theoretical predictions are highly sensitive: small parameter changes determine whether technological competition is sustained, or converges into a market structure with an entrenched leadership and lower aggregate R&D. The subjects' strategies are far less sensitive. In most treatments the R&D races tend to converge to entrenched leadership. Investment is highest when rivals are close. This stylized fact, and so the usefulness of neck-to-neck competition in general, is largely unrelated to rivalry concerns but can be explained using a quantal response extension of Markov perfection.

Keywords: R&D race; innovation; dynamics; experiment (search for similar items in EconPapers)
JEL-codes: C72 C91 O31 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2008-03
New Economics Papers: this item is included in nep-exp, nep-ino, nep-ipr, nep-pr~, nep-mic and nep-tid
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http://www.ccp.uea.ac.uk/publicfiles/workingpapers/CCP08-22.pdf (application/pdf)

Related works:
Journal Article: Understanding perpetual R&D races (2010) Downloads
Working Paper: Understanding Perpetual R&D Races (2008) Downloads
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