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Understanding perpetual R&D races

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Author Info

  • Yves Breitmoser

    ()

  • Jonathan Tan

    ()

  • Daniel Zizzo

    ()

Abstract

This paper presents an experimental study of dynamic indefinite horizon R&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.

(This abstract was borrowed from another version of this item.)

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File URL: http://hdl.handle.net/10.1007/s00199-009-0487-4
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Bibliographic Info

Article provided by Springer in its journal Economic Theory.

Volume (Year): 44 (2010)
Issue (Month): 3 (September)
Pages: 445-467

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Handle: RePEc:spr:joecth:v:44:y:2010:i:3:p:445-467

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Related research

Keywords: Markov quantal response equilibrium; Race; Experiment; C72; C91; O31;

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References

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  11. Dimitrios Voliotis, 2006. "Strategic market games quantal response equilibria," Economic Theory, Springer, vol. 27(2), pages 475-482, January.
  12. C. Monica Capra, 1999. "Anomalous Behavior in a Traveler's Dilemma?," American Economic Review, American Economic Association, vol. 89(3), pages 678-690, June.
  13. Turocy, Theodore L., 2005. "A dynamic homotopy interpretation of the logistic quantal response equilibrium correspondence," Games and Economic Behavior, Elsevier, vol. 51(2), pages 243-263, May.
  14. Yi, Kang-Oh, 2005. "Quantal-response equilibrium models of the ultimatum bargaining game," Games and Economic Behavior, Elsevier, vol. 51(2), pages 324-348, May.
  15. Aoki, Reiko, 1991. "R&D Competition for Product Innovation: An Endless Race," American Economic Review, American Economic Association, vol. 81(2), pages 252-56, May.
  16. Gilbert, Richard J & Newbery, David M G, 1982. "Preemptive Patenting and the Persistence of Monopoly," American Economic Review, American Economic Association, vol. 72(3), pages 514-26, June.
  17. Yves Breitmoser & Jonathan H. W. Tan & Daniel John Zizzo, 2006. "A Test of Perpetual R&D Races," Working Papers 06-11, Centre for Competition Policy, University of East Anglia.
  18. Aghion, Philippe & Harris, Christopher & Vickers, John, 1997. "Competition and growth with step-by-step innovation: An example," European Economic Review, Elsevier, vol. 41(3-5), pages 771-782, April.
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Citations

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Cited by:
  1. Bereket Kebede and Daniel John Zizzo, 2011. "Envy and Agricultural Innovation: An Experimental Case Study from Ethiopia," Economics Series Working Papers CSAE WPS/2011-06, University of Oxford, Department of Economics.
  2. Bereket Kebede & Daniel John Zizzo, 2011. "Envy and agricultural innocation: An experimental case study from Ethiopia," Working Paper series, University of East Anglia, Centre for Behavioural and Experimental Social Science (CBESS) 11-12, School of Economics, University of East Anglia, Norwich, UK..
  3. Mathias Erlei & Anne-Kathrin Dimmig, 2012. "Quasi-Rational R&D Behavior in an Environment with Fundamental Uncertainty," TUC Working Papers in Economics 0008, Abteilung für Volkswirtschaftslehre, Technische Universität Clausthal (Department of Economics, Technical University Clausthal).
  4. Friedel Bolle & Jonathan H. W. Tan & Daniel John Zizzo, 2010. "Vendettas," Working Paper series, University of East Anglia, Centre for Behavioural and Experimental Social Science (CBESS) 10-04, School of Economics, University of East Anglia, Norwich, UK..
    • Friedel Bolle & Jonathan H.W. Tan & Daniel John Zizzo, 2010. "Vendettas," Discussion Papers 2010-02, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
  5. Breitmoser, Yves, 2010. "Hierarchical Reasoning versus Iterated Reasoning in p-Beauty Contest Guessing Games," MPRA Paper 19893, University Library of Munich, Germany.
  6. Donja Darai & Jens Grosser & Nadja Trhal, 2009. "Patents versus Subsidies – A Laboratory Experiment," Working Papers 0905, University of Zurich, Socioeconomic Institute.
  7. Yves Breitmoser, 2012. "Proto-coalition bargaining and the core," Economic Theory, Springer, vol. 51(3), pages 581-599, November.
  8. Breitmoser, Yves & Tan, Jonathan H.W., 2011. "Ultimata bargaining: generosity without social motives," MPRA Paper 33613, University Library of Munich, Germany.
  9. Breitmoser, Yves, 2012. "Cooperation, but no reciprocity: Individual strategies in the repeated Prisoner's Dilemma," MPRA Paper 41731, University Library of Munich, Germany.

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