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Understanding Perpetual R&D Races

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Author Info

  • Yves Breitmoser

    (Institute of Microeconomics, European University Viadrina)

  • Jonathan H. W. Tan

    (Institute of Microeconomics, European University Viadrina)

  • Daniel John Zizzo

    ()
    (Centre for Competition Policy, University of East Anglia)

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&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 Info

Paper provided by Centre for Competition Policy, University of East Anglia in its series Working Papers with number 08-22.

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Length: 34 pages
Date of creation: Mar 2008
Date of revision:
Handle: RePEc:ccp:wpaper:wp08-22

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Keywords: R&D race; innovation; dynamics; experiment;

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References

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  8. 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.
  9. Marco Battaglini & Thomas Palfrey, 2012. "The dynamics of distributive politics," Economic Theory, Springer, vol. 49(3), pages 739-777, April.
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Citations

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Cited by:
  1. Breitmoser, Yves, 2012. "Cooperation, but no reciprocity: Individual strategies in the repeated Prisoner's Dilemma," MPRA Paper 41731, University Library of Munich, Germany.
  2. Breitmoser, Yves & Tan, Jonathan H.W., 2011. "Ultimata bargaining: generosity without social motives," MPRA Paper 33613, University Library of Munich, Germany.
  3. 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.
  4. Philippe Aghion & Stefan Bechtold & Lea Cassar & Holger Herz, 2014. "The Causal Effects of Competition on Innovation: Experimental Evidence," NBER Working Papers 19987, National Bureau of Economic Research, Inc.
  5. 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..
  6. Breitmoser, Yves & Tan, Jonathan H.W., 2010. "Generosity in bargaining: Fair or fear?," MPRA Paper 27444, University Library of Munich, Germany.
  7. Alex Krumer, 2013. "Best-of-two contests with psychological effects," Theory and Decision, Springer, vol. 75(1), pages 85-100, July.
  8. Breitmoser, Yves, 2010. "Proto-coalition bargaining and the core," MPRA Paper 24995, University Library of Munich, Germany.
  9. Breitmoser, Yves, 2010. "Hierarchical Reasoning versus Iterated Reasoning in p-Beauty Contest Guessing Games," MPRA Paper 19893, University Library of Munich, Germany.
  10. Breitmoser, Yves & Tan, Jonathan H.W., 2014. "Reference Dependent Altruism," MPRA Paper 52774, University Library of Munich, Germany.
  11. 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).
  12. Isabelle Brocas & Juan Carrillo & Thomas Palfrey, 2012. "Information gatekeepers: theory and experimental evidence," Economic Theory, Springer, vol. 51(3), pages 649-676, November.
  13. Donja Darai & Jens Grosser & Nadja Trhal, 2009. "Patents versus Subsidies – A Laboratory Experiment," SOI - Working Papers 0905, Socioeconomic Institute - University of Zurich.

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