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Modeling Stochastic Innovation Races

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  • Hans W. Gottinger

    (University of Maastricht and CSEF, University of Salerno)

Abstract

We consider a firm moving towards a stochastic final destination, to be chosen from a discrete set after a decision period. The decision period itself may be deterministic or stochastic. We assume the firm can move at variable innovation (R&D) speed associated with a monotone nondecreasing variable cost, and it can also stop and move anywhere. There is a fixed cost per time unit "carried" by the firm as well, associated with keeping at the knowledge (technology) frontier. We investigate various types of the firm's optimal trajectory in the R&D race during the decision period.

Suggested Citation

  • Hans W. Gottinger, 2001. "Modeling Stochastic Innovation Races," CSEF Working Papers 51, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    • Handle: RePEc:sef:csefwp:51
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    References listed on IDEAS

    as
    1. Christopher Harris & John Vickers, 1987. "Racing with Uncertainty," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 54(1), pages 1-21.
    2. Christopher Harris & John Vickers, 1985. "Perfect Equilibrium in a Model of a Race," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 52(2), pages 193-209.
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