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Competitive experimentation with private information: The survivor's curse

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  • Moscarini, Giuseppe
  • Squintani, Francesco

Abstract

We study a winner-take-all R&D race between two firms that are privately informed about the arrival rate of an invention. Over time, each firm only observes whether the opponent left the race or not. The equilibrium displays a strong herding effect, that we call a 'survivor's curse.' Unlike in the case of symmetric information, the two firms may quit the race (nearly) simultaneously even when their costs and benefits for research differ significantly.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Theory.

Volume (Year): 145 (2010)
Issue (Month): 2 (March)
Pages: 639-660

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Handle: RePEc:eee:jetheo:v:145:y:2010:i:2:p:639-660

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Web page: http://www.elsevier.com/locate/inca/622869

Related research

Keywords: Learning Experimentation Private information Survivor's curse;

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Cited by:
  1. Ufuk Akcigit & Qingmin Liu, 2011. "The Role of Information in Competitive Experimentation," PIER Working Paper Archive 11-038, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  2. Ufuk Akcigit & Qingmin Liu, 2011. "The Role of Information in Competitive Experimentation," Levine's Working Paper Archive 786969000000000321, David K. Levine.
  3. Godfrey Keller & Sven Rady, 2013. "Breakdowns," Levine's Working Paper Archive 786969000000000635, David K. Levine.
  4. Rosenberg, Dinah & Salomon, Antoine & Vieille, Nicolas, 2013. "On games of strategic experimentation," Games and Economic Behavior, Elsevier, vol. 82(C), pages 31-51.
  5. Ufuk Akcigit & Qingmin Liu, 2011. "The Role of Information in Competitive Experimentation," NBER Working Papers 17602, National Bureau of Economic Research, Inc.
  6. Murto, Pauli & Välimäki, Juuso, 2013. "Delay and information aggregation in stopping games with private information," Journal of Economic Theory, Elsevier, vol. 148(6), pages 2404-2435.

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