Understanding Perpetual R&D Races
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.
|Date of creation:||Mar 2008|
|Date of revision:|
|Contact details of provider:|| Postal: University Park, Nottingham NG7 2RD|
Phone: +44 (0) 115 951 5620
Fax: +44 (0) 115 951 4159
Web page: http://www.nottingham.ac.uk/economics/cedex/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Battaglini, Marco & Palfrey, Thomas R., 2007.
"The dynamics of distributive politics,"
1273, California Institute of Technology, Division of the Humanities and Social Sciences.
- R. Cookson, 2000. "Framing Effects in Public Goods Experiments," Experimental Economics, Springer, vol. 3(1), pages 55-79, June.
- Mathijs Jansen & Dries Vermeulen, 2001. "On the computation of stable sets and strictly perfect equilibria," Economic Theory, Springer, vol. 17(2), pages 325-344.
- John C. Harsanyi & Reinhard Selten, 1988. "A General Theory of Equilibrium Selection in Games," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262582384, June.
- Cockburn, Iain. & Henderson, Iain., 1994.
"Racing to invest? : the dynamics of competition in ethical drug discovery,"
3710-94., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Cockburn, Iain & Henderson, Rebecca, 1994. "Racing to Invest? The Dynamics of Competition in Ethical Drug Discovery," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 3(3), pages 481-519, Fall.
- Christopher Harris & John Vickers, 1987. "Racing with Uncertainty," Review of Economic Studies, Oxford University Press, vol. 54(1), pages 1-21.
- 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.
- Daniel John Zizzo, 2001.
"Racing with Uncertainty: A Patent Race Experiment,"
Economics Series Working Papers
68, University of Oxford, Department of Economics.
- Reinganum, Jennifer F, 1983.
"Uncertain Innovation and the Persistence of Monopoly,"
American Economic Review,
American Economic Association, vol. 73(4), pages 741-48, September.
- Reinganum, Jennifer R., 1982. "Uncertain Innovation and the Persistence of Monopoly," Working Papers 431, California Institute of Technology, Division of the Humanities and Social Sciences.
- Yi, Kang-Oh, 2005. "Quantal-response equilibrium models of the ultimatum bargaining game," Games and Economic Behavior, Elsevier, vol. 51(2), pages 324-348, May.
- Aghion, Philippe & Harris, Christopher & Vickers, John, 1997. "Competition and growth with step-by-step innovation: An example," European Economic Review, Elsevier, vol. 41(3-5), pages 771-782, April.
- Dimitrios Voliotis, 2006. "Strategic market games quantal response equilibria," Economic Theory, Springer, vol. 27(2), pages 475-482, January.
- Rebecca Henderson & Iain Cockburn, 1996.
"Scale, Scope, and Spillovers: The Determinants of Research Productivity in Drug Discovery,"
RAND Journal of Economics,
The RAND Corporation, vol. 27(1), pages 32-59, Spring.
- Rebecca Henderson & Iain Cockburn, . "Scale, Scope and Spillovers: The Determinants of Research Productivity in Drug Discovery," Working Papers ec25/94, Department of Economics, University of Lancaster.
- Reinhard Selten, 1998.
"Axiomatic Characterization of the Quadratic Scoring Rule,"
Springer, vol. 1(1), pages 43-61, June.
- Selten, Reinhard, 1996. "Axiomatic Characterization of the Quadratic Scoring Rule," Discussion Paper Serie B 390, University of Bonn, Germany.
- Turocy, Theodore L., 2005. "A dynamic homotopy interpretation of the logistic quantal response equilibrium correspondence," Games and Economic Behavior, Elsevier, vol. 51(2), pages 243-263, May.
- Dufwenberg, Martin & Gneezy, Uri & Goeree, Jacob K. & Nagel, Rosemarie, 2002.
"Price Floors and Competition,"
Research Papers in Economics
2002:13, Stockholm University, Department of Economics.
- Gilbert, Richard J & Newbery, David M G, 1982. "Preemptive Patenting and the Persistence of Monopoly," American Economic Review, American Economic Association, vol. 72(3), pages 514-26, June.
- C. Monica Capra, 1999. "Anomalous Behavior in a Traveler's Dilemma?," American Economic Review, American Economic Association, vol. 89(3), pages 678-690, June.
- Aoki, Reiko, 1991. "R&D Competition for Product Innovation: An Endless Race," American Economic Review, American Economic Association, vol. 81(2), pages 252-56, May.
When requesting a correction, please mention this item's handle: RePEc:cdx:dpaper:2008-04. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Alex Possajennikov)
If references are entirely missing, you can add them using this form.