A Test of Perpetual R&D Races
AbstractThis 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&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.
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Bibliographic InfoPaper provided by Centre for Competition Policy, University of East Anglia in its series Working Papers with number 06-11.
Length: 34 pages
Date of creation: Jun 2006
Date of revision:
R&D race; innovation; dynamics; experiment;
Find related papers by JEL classification:
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
- O31 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-07-07 (All new papers)
- NEP-COM-2007-07-07 (Industrial Competition)
- NEP-EXP-2007-07-07 (Experimental Economics)
- NEP-INO-2007-07-07 (Innovation)
- NEP-IPR-2007-07-07 (Intellectual Property Rights)
- NEP-MIC-2007-07-07 (Microeconomics)
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- Yves Breitmoser & Jonathan H.W. Tan & Daniel John Zizzo, 2008.
"Understanding Perpetual R&D Races,"
2008-04, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
- Yves Breitmoser & Jonathan H. W. Tan & Daniel John Zizzo, 2008. "Understanding Perpetual R&D Races," Working Papers 08-22, Centre for Competition Policy, University of East Anglia.
- Yves Breitmoser & Jonathan H.W. Tan & Daniel John Zizzo, 2008. "Understanding Perpetual R&D Races," Discussion Papers 2008-04, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
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