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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

    ()
    (Nottingham University Business School, University of Nottingham)

  • Daniel John Zizzo

    ()
    (School of Economics, University of East Anglia)

Abstract

This paper presents an experimental study of dynamic indefinite horizon R&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 The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham in its series Discussion Papers with number 2008-04.

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Date of creation: Mar 2008
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Handle: RePEc:not:notcdx:2008-04

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

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References

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  13. Dimitrios Voliotis, 2006. "Strategic market games quantal response equilibria," Economic Theory, Springer, vol. 27(2), pages 475-482, January.
  14. 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.
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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. 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.
  3. Breitmoser, Yves, 2010. "Hierarchical Reasoning versus Iterated Reasoning in p-Beauty Contest Guessing Games," MPRA Paper 19893, University Library of Munich, Germany.
  4. Donja Darai & Jens Grosser & Nadja Trhal, 2009. "Patents versus Subsidies – A Laboratory Experiment," SOI - Working Papers 0905, Socioeconomic Institute - University of Zurich.
  5. 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).
  6. Breitmoser, Yves & Tan, Jonathan H.W., 2014. "Reference Dependent Altruism," MPRA Paper 52774, 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 & Tan, Jonathan H.W., 2011. "Ultimata bargaining: generosity without social motives," MPRA Paper 33613, University Library of Munich, Germany.
  9. Bereket Kebede and Daniel John Zizzo, 2011. "Envy and Agricultural Innovation: An Experimental Case Study from Ethiopia," Economics Series Working Papers CSAE WPS/2011-06, University of Oxford, Department of Economics.
  10. Breitmoser, Yves, 2010. "Proto-coalition bargaining and the core," MPRA Paper 24995, University Library of Munich, Germany.
  11. Breitmoser, Yves & Tan, Jonathan H.W., 2010. "Generosity in bargaining: Fair or fear?," MPRA Paper 27444, University Library of Munich, Germany.
  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. 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.

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