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Competitive experimentation with private information: The survivor's curse

  • Moscarini, Giuseppe
  • Squintani, Francesco

We study a winner-take-all R&D race between two firms that are privately informed about the arrival rate of an invention. Over time, each firm only observes whether the opponent left the race or not. The equilibrium displays a strong herding effect, that we call a 'survivor's curse.' Unlike in the case of symmetric information, the two firms may quit the race (nearly) simultaneously even when their costs and benefits for research differ significantly.

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Article provided by Elsevier in its journal Journal of Economic Theory.

Volume (Year): 145 (2010)
Issue (Month): 2 (March)
Pages: 639-660

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Handle: RePEc:eee:jetheo:v:145:y:2010:i:2:p:639-660
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622869

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