Investment in Risky Innovations with Multiple Innovators
AbstractConsider a market in which firms compete to develop a new product. While most work focuses on a single firm successfully developing the new product, the emphasis here is on possibly multiple firms devloping the new product. Thus, a firm has uncertainty about how many competitors it will face as well as whether it will succed. The results suggest that this uncertainty about how many firms will succeed promotes under-investment, but that the well-konown entry inefficiency under certainty (Mankiw and Whnston) promotes over-investment.
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Bibliographic InfoPaper provided by Michigan State - Econometrics and Economic Theory in its series Papers with number 9802.
Length: 27 pages
Date of creation: 1998
Date of revision:
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Postal: MICHIGAN STATE UNIVERSITY, DEPARTMENT OF ECONOMICS, EAST LANSING MICHIGAN 48824 U.S.A.
Web page: http://econ.msu.edu/
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COMPETITION ; PRODUCTION ; INVESTMENTS;
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