Innovation in a generalized timing game
AbstractWe examine innovation as a timing game with complete information and observable actions in which firms decide when to enter a market. We characterize all pure strategy subgame perfect equilibria for the two-player symmetric game. In particular, we describe all subgame perfect equilibria when both the leader's and the followers' payoff functions are multi-peaked, non-monotonic and discontinuous. We find that there are potentially multiple equilibria, which could involve: joint adoption by both firms, with and without rent equalization; and, alternatively, single-firm adoption with a second-mover advantage. Economic applications are discussed including process and product innovation and the timing of the sale of an asset.
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Bibliographic InfoPaper provided by University of Sydney, School of Economics in its series Working Papers with number 2013-16.
Date of creation: Aug 2013
Date of revision:
product innovation; process innovation; follower; leader; entry; timing games;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-09-13 (All new papers)
- NEP-COM-2013-09-13 (Industrial Competition)
- NEP-GTH-2013-09-13 (Game Theory)
- NEP-HPE-2013-09-13 (History & Philosophy of Economics)
- NEP-INO-2013-09-13 (Innovation)
- NEP-MIC-2013-09-13 (Microeconomics)
- NEP-TID-2013-09-13 (Technology & Industrial Dynamics)
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