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Relative Performance and R&D Competition

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  • Toshihiro Matsumura
  • Noriaki Matsushima
  • Susumu Cato

Abstract

This paper formulates a duopoly model in which firms care about relative profits as well as their own profits. Our purpose is to investigate the relationship between the weight of relative performance and R&D expenditure. We find a non-monotone relationship between the weight of relative performance in their objectives and their R&D levels. Both highly reciprocal (altruism) and negative reciprocal attitudes yield high levels of R&D, while the intermediate situations yield low levels of R&D.

Suggested Citation

  • Toshihiro Matsumura & Noriaki Matsushima & Susumu Cato, 2009. "Relative Performance and R&D Competition," ISER Discussion Paper 0752, Institute of Social and Economic Research, Osaka University.
  • Handle: RePEc:dpr:wpaper:0752
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    File URL: http://www.iser.osaka-u.ac.jp/library/dp/2009/DP0752.pdf
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    References listed on IDEAS

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    Cited by:

    1. Tanaka, Yasuhito, 2014. "Relative profit maximization and irrelevance of leadership in Stackelberg model," MPRA Paper 55887, University Library of Munich, Germany.
    2. Yasuhito Tanaka, 2013. "Irrelevance of the choice of strategic variables in duopoly under relative profit maximization," Economics and Business Letters, Oviedo University Press, vol. 2(2), pages 75-83.

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