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Pre-emptive Search and R&D Clustering

James Cardon () and Dan Sasaki
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Dan Sasaki: Institute of Economics, University of Copenhagen

No 96-21, Discussion Papers from University of Copenhagen. Department of Economics

Abstract: While many preceding studies on R&D discuss the equilibrium amount and speed of the R&D investment, this paper focuses on its equilibrium direction. Under a broad class of parametric conditions, there is a pure-strategy equilibrium in which multiple firms "cluster", i.e. search for the same potential project even if [i] potential projects are ex ante homogeneous, [ii] firms have negative, not positive, externalities toward each other in that a potential project can be made into a profit-making patent by no more than one firm, and [iii] firms have simultaneous moves so that there is no informational spillover between them. Economic applications of this "clustering" equilibrium result are not confined to the R&D investment. Any situation where agents are racing in search of economic opportunities can be an example of this model.

Pages: 18 pages
Date: 1996-12
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