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Investment in Risky Innovations with Multiple Innovators

Author

Listed:
  • Creane, A.

Abstract

Consider a market in which firms compete to develop a new product. While most work focuses on a single firm successfully developing the new product, the emphasis here is on possibly multiple firms devloping the new product. Thus, a firm has uncertainty about how many competitors it will face as well as whether it will succed. The results suggest that this uncertainty about how many firms will succeed promotes under-investment, but that the well-konown entry inefficiency under certainty (Mankiw and Whnston) promotes over-investment.

Suggested Citation

  • Creane, A., 1998. "Investment in Risky Innovations with Multiple Innovators," Papers 9802, Michigan State - Econometrics and Economic Theory.
  • Handle: RePEc:fth:mistet:9802
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    More about this item

    Keywords

    COMPETITION ; PRODUCTION ; INVESTMENTS;

    JEL classification:

    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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