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The Last Shall Be First: Innovation as a Head-to-Head Race

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  • Patrick Arnold, Marc Möller, Catherine Roux

Abstract

Uncertainty about the value of a contested innovation induces leaders and laggards to update their expectations in opposite directions. We characterize situations in which firms that have obtained an initial advantage are not the most likely to achieve final success. In spite of amplifying a leader’s advantage, greater contest intensity facilitates this effect, challenging the view that laggards require support to remain competitive.

Suggested Citation

  • Patrick Arnold, Marc Möller, Catherine Roux, 2025. "The Last Shall Be First: Innovation as a Head-to-Head Race," Diskussionsschriften dp2505, Universitaet Bern, Departement Volkswirtschaft.
    • Handle: RePEc:ube:dpvwib:dp2505
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    References listed on IDEAS

    as
    1. Doraszelski, Ulrich, 2003. "An R&D Race with Knowledge Accumulation," RAND Journal of Economics, The RAND Corporation, vol. 34(1), pages 20-42, Spring.
    2. Marc Möller & Juan Beccuti, 2025. "Fighting for Lemons: The Balancing Effect of Private Information on Incentives in Dynamic Contests," The Economic Journal, Royal Economic Society, vol. 135(669), pages 1641-1676.
    3. Subhasish M. Chowdhury & Patricia Esteve‐González & Anwesha Mukherjee, 2023. "Heterogeneity, leveling the playing field, and affirmative action in contests," Southern Economic Journal, John Wiley & Sons, vol. 89(3), pages 924-974, January.
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    Keywords

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    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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