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An Uncertainty-Based Explanation of Symmetric

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  • Cozzi, Guido

    () (University of Macerata)

  • Giordani, Paolo

    () (European University Institute)

  • Zamparelli, Luca

    () (New School University)

Abstract

We provide a re-foundation of the symmetric growth equilibrium characterizing the research sector of all vertical R&D-driven growth models. This result does not rely on the usual assumption of a symmetric expectation on the future per-sector R&D expenditure. Indeed, with this structure of expectations, returns in R&D are equalized, and agents turn out to be indifferent as to where targeting research: hence, the problem of the allocation of R&D investments across sectors is indeterminate. In line with the ’true’ Schumpeterian perspective, we solve this indeterminacy by allowing for decision makers strictly uncertain about the future per-sector distribution of R&D efforts. By using the Gilboa-Schmeidler’s MEU decision rule, we prove that the symmetric structure of R&D investment is the unique rational expectations (RE) equilibrium compatible with uncertainty-averse agents adopting a maximin strategy.

Suggested Citation

  • Cozzi, Guido & Giordani, Paolo & Zamparelli, Luca, 2006. "An Uncertainty-Based Explanation of Symmetric," Sonderforschungsbereich 504 Publications 06-08, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
  • Handle: RePEc:xrs:sfbmaa:06-08
    Note: Financial support from the Deutsche Forschungsgemeinschaft, SFB 504, at the University of Mannheim, is gratefully acknowledged.
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    1. F J Anscombe & R J Aumann, 2000. "A Definition of Subjective Probability," Levine's Working Paper Archive 7591, David K. Levine.
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