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Relative Performance and R&D Competition

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  • Toshihiro Matsumura
  • Noriaki Matsushima
  • Susumu Cato

Abstract

This paper formulates a duopoly model in which firms care about relative profits as well as their own profits. Our purpose is to investigate the relationship between the weight of relative performance and R&D expenditure. We find a non-monotone relationship between the weight of relative performance in their objectives and their R&D levels. Both highly reciprocal (altruism) and negative reciprocal attitudes yield high levels of R&D, while the intermediate situations yield low levels of R&D.

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File URL: http://www.iser.osaka-u.ac.jp/library/dp/2009/DP0752.pdf
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Paper provided by Institute of Social and Economic Research, Osaka University in its series ISER Discussion Paper with number 0752.

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Date of creation: Aug 2009
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Handle: RePEc:dpr:wpaper:0752

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