Understanding Perpetual R and D Races

Yves Breitmoser (), Jonathan Tan and Daniel Zizzo

No 2008-22, Working Paper series, University of East Anglia, Centre for Competition Policy (CCP) from Centre for Competition Policy, University of East Anglia, Norwich, UK.

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 and D. The subjects' strategies are far less sensitive. In most treatments, the R and 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 and D race; innovation; dynamics; experiment (search for similar items in EconPapers)
JEL-codes: C72 C91 O31 (search for similar items in EconPapers)
Date: 2008-03-01
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:uea:ueaccp:2008_22

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