Non-Cooperative Exercise Boundaries and Regulation under Uncertainty: The Case of Cost-Reducing R&D
AbstractThis paper extends the concept of the exercise boundary as an analytical tool in determining when an optimizing agent might undertake an irreversible action under uncertainty. to situations where the objective function of optimizing agents depends on decisions taken by other agents. By using the case of cost redusing R&D in a fixed numbers oligopoly under demand and technological uncertainty, the exercise bounadaries and the corresponding optimal R&D accumulation paths are determined fot the non-cooperative, cooperative, and socially optimal cases. Comparison of the exercise boundaries makes possible the formulation of R&D policy in the form of subsidies.
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Bibliographic InfoPaper provided by University of Crete, Department of Economics in its series Working Papers with number 0112.
Length: 30 pages
Date of creation: 16 Sep 2001
Date of revision:
Uncertainty; Irreversibility; Exercise Boundary; Oligopoly; R&D;
Find related papers by JEL classification:
- C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
- D8 - Microeconomics - - Information, Knowledge, and Uncertainty
- L0 - Industrial Organization - - General
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