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Racing to Ruin

Author

Listed:
  • Drew Fudenberg
  • Andrew Koh

Abstract

We study R&D competition in the shadow of disaster: advancing the technology frontier raises the risk of permanently ending all firms' payoffs. Under perfect monitoring and common knowledge of rationality, the equilibrium frontier is bounded below by the optimal stopping time of a monopolist, and above by that of a representative firm that persistently but mistakenly believes its rival is about to stop. We then analyze how the frontier is shaped by transparency (speed of monitoring) and trust (belief in the rationality of rival firms).

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  • Drew Fudenberg & Andrew Koh, 2026. "Racing to Ruin," Papers 2607.27638, arXiv.org.
    • Handle: RePEc:arx:papers:2607.27638
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    References listed on IDEAS

    as
    1. Konrad, Kai A., 2009. "Strategy and Dynamics in Contests," OUP Catalogue, Oxford University Press, number 9780199549603.
    2. Ron Siegel, 2009. "All-Pay Contests," Econometrica, Econometric Society, vol. 77(1), pages 71-92, January.
    3. Reinganum, Jennifer F, 1982. "A Dynamic Game of R and D: Patent Protection and Competitive Behavior," Econometrica, Econometric Society, vol. 50(3), pages 671-688, May.
    4. Krishna, Vijay & Morgan, John, 1997. "An Analysis of the War of Attrition and the All-Pay Auction," Journal of Economic Theory, Elsevier, vol. 72(2), pages 343-362, February.
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