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A Test of Perpetual R&D Races

Author

Listed:
  • Yves Brejtmoser

    (Institute of Microeconomics, European University Viadrina)

  • Jonathan H.W. Tan

    (Institute of Microeconomics, European University Viadrina)

  • Daniel John Zizzo

    (Centre for Competition Policy and School of Economics, University of East Anglia)

Abstract

This paper presents an experimental study of dynamic indefinite horizon R&D races with uncertainty and multiple prizes. The theoretical predictions are highly sensitive: small parameter changes determine whether technological competition is sustained over time or converges into a market structure with an entrenched leadership and lower aggregate R&D research. The subjects' strategies are far less sensitive. In three out of four treatments (with the exception being a control treatment), the R&D races tend to converge to entrenched leadership. Investment is highest when rivals are close, and there is evidence of average over-investment.

Suggested Citation

  • Yves Brejtmoser & Jonathan H.W. Tan & Daniel John Zizzo, 2006. "A Test of Perpetual R&D Races," Working Paper series, University of East Anglia, Centre for Competition Policy (CCP) 2006-11, Centre for Competition Policy, University of East Anglia, Norwich, UK..
    • Handle: RePEc:uea:ueaccp:2006_11
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    Cited by:

    1. Yves Breitmoser & Jonathan Tan & Daniel Zizzo, 2010. "Understanding perpetual R&D races," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 44(3), pages 445-467, September.

    More about this item

    Keywords

    R&D race; innovation; dynamics; experiment.;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • 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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