Innovative Activity and Sunk Cost

Todd Kaplan, I. Luski and David Wettstein ()

Discussion Papers from University of Exeter, Department of Economics

Abstract: We introduce time-dependent rewards into a general framework for analyzing innovative activity among firms with sunk costs of R&D. When firms are identical, innovation is delayed by an increase in the number of firms or a decrease in the size of the reward. When one firm has higher profit potential, it is more likely to innovate first. Our framework generalizes an all-pay auction; however, we show that under conditions there is qualitatively different equilibrium behavior.

Keywords: COSTS; RESEARCH AND DEVELOPMENT; AUCTIONS (search for similar items in EconPapers)
JEL-codes: D44 O31 O32 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2000
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Citations: View citations in EconPapers (4)

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Related works:
Journal Article: Innovative activity and sunk cost (2003)
Working Paper: Innovative Activity and Sunk Cost (2000)
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Persistent link: https://EconPapers.repec.org/RePEc:exe:wpaper:0006

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