Learning, Preemption, and the Degree of Rivalry
Volume: Volume 16, No. 1
Issue: Spring 1985
Pages: pp. 84-92
Authors: Chester S. Spatt and Frederic P. Sterbenz
Title: Learning, Preemption, and the Degree of Rivalry
Abstract: We examine a model in which all firms receive common signals as to the uncertain profitability of an investment whose actual payoffs are split only among those who develop the project earliest. The benefit from preempting rivals yields an equilibrium reduction in the amount of learning and earlier development as the number or rivals increases. The set of equilibria shrinks as the number of rivals gets large, and in the limit only the competitive outcome occurs.
JEL Classification
Microeconomics Theory of Firm and Industry under Imperfectly Competitive Market Structures (0226)
Economics of Uncertainty and Information; Game Theory and Bargaining Theory: General (0260)