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Optimal R&D Investment Strategies with Quantity Competition under the Threat of Superior Entry

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  • Lukach, R.
  • Kort, P.M.

    (Tilburg University, School of Economics and Management)

  • Plasmans, J.E.J.

    (Tilburg University, School of Economics and Management)

Abstract

This paper studies R&D investment decisions of a firm facing the threat of new technology entry and subject to technical uncertainty. We distinguish four scenarios: inevitable entry, entry deterrence, entry blockade, and non-credible entry threat. The entry threat stimulates the incumbent to innovate in case entry prevention is possible, but discourages R&D if entry is inevitable. In the case of entry deterrence the incumbent successfully prevents entry by innovating. Greater technical uncertainty stimulates starting R&D and can result in implementation of more expensive research projects. The welfare analysis shows that the relation between welfare and entry cost and between welfare and uncertainty is non-monotonic.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Lukach, R. & Kort, P.M. & Plasmans, J.E.J., 2005. "Optimal R&D Investment Strategies with Quantity Competition under the Threat of Superior Entry," Other publications TiSEM f41be61a-5422-43b2-9080-0, Tilburg University, School of Economics and Management.
    • Handle: RePEc:tiu:tiutis:f41be61a-5422-43b2-9080-0d52532ff269
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    References listed on IDEAS

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