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Competition in product design: An experiment exploring innovation behavior

Author

Listed:
  • Uwe Cantner

    (University of Jena, School of Busniess and Economics)

  • Werner Güth

    (Max Planck Institute of Economics Jena, Strategic Interaction Unit)

  • Andreas Nicklisch

    (Max Planck Institute for Research on Collective Goods, Bonn, Germany)

  • Torsten Weiland

    (Max Planck Institute of Economics Jena, Strategic Interaction Unit)

Abstract

We experimentally investigate competition in innovation in a patent race scenario. Pairs of subjects compete as seller firms on a duopoly market, engaging in risky search investments. Successful innovation is rewarded through temporary monopoly rents. Throughout the interaction, subjects receive feedback on own and other's search success and profit margin. Partitioning subjects into subgroups of investor types reveals that the majority of subjects condition investments on the degree of competition as measured by sales shares, while for others no correlation is ascertained. Heterogeneity in individual risk attitudes and differing experiences with related search tasks may explain this finding.

Suggested Citation

  • Uwe Cantner & Werner Güth & Andreas Nicklisch & Torsten Weiland, 2007. "Competition in product design: An experiment exploring innovation behavior," Jena Economic Research Papers 2007-014, Friedrich-Schiller-University Jena.
  • Handle: RePEc:jrp:jrpwrp:2007-014
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    References listed on IDEAS

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    2. Brüggemann Julia & Proeger Till, 2017. "The Effectiveness of Public Subsidies for Private Innovations. An Experimental Approach," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 17(4), pages 1-21, October.
    3. Julia Brüggemann & Kilian Bizer, 2016. "Laboratory experiments in innovation research: a methodological overview and a review of the current literature," Journal of Innovation and Entrepreneurship, Springer, vol. 5(1), pages 1-13, December.
    4. Anna Gardocka-Jałowiec, 2011. "Neuroeconomic Conditioning of the Influence of a Market Demand of Consumers on an Innovative Character of Polish Companies," Contemporary Economics, University of Economics and Human Sciences in Warsaw., vol. 5(1), March.
    5. Engel, Christoph & Kleine, Marco, 2015. "Who is afraid of pirates? An experiment on the deterrence of innovation by imitation," Research Policy, Elsevier, vol. 44(1), pages 20-33.
    6. Brüggemann, Julia & Meub, Lukas, 2017. "Experimental evidence on the effects of innovation contests," Information Economics and Policy, Elsevier, vol. 39(C), pages 72-83.
    7. Brüggemann, Julia & Crosetto, Paolo & Meub, Lukas & Bizer, Kilian, 2016. "Intellectual property rights hinder sequential innovation. Experimental evidence," Research Policy, Elsevier, vol. 45(10), pages 2054-2068.
    8. Brüggemann, Julia & Proeger, Till, 2017. "The effectiveness of public subsidies for private innovations: An experimental approach," Center for European, Governance and Economic Development Research Discussion Papers 266, University of Goettingen, Department of Economics.
    9. Werner Güth & Kirsten Häger & Oliver Kirchkamp & Joachim Schwalbach, 2016. "Testing Forbearance Experimentally: Duopolistic Competition of Conglomerate Firms," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 23(1), pages 63-86, February.
    10. Henrekson, Magnus & Johansson, Dan & Karlsson, Johan, 2021. "To Be or Not to Be: The Entrepreneur in Endogenous Growth Theory," Working Papers 2021:3, Örebro University, School of Business.
    11. Brueggemann, Julia & Meub, Lukas, 2015. "Experimental evidence on the effects of innovation contests," Center for European, Governance and Economic Development Research Discussion Papers 251, University of Goettingen, Department of Economics.
    12. Mathias Erlei & Anne-Kathrin Dimmig, 2012. "Quasi-Rational R&D Behavior in an Environment with Fundamental Uncertainty," TUC Working Papers in Economics 0008, Abteilung für Volkswirtschaftslehre, Technische Universität Clausthal (Department of Economics, Technical University Clausthal).

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    More about this item

    Keywords

    innovation; competition; imitation; patent race;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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