Dynamic R&D Competition with Learning
Volume: Volume 28, No. 4
Issue: Winter 1997
Pages: pp. 751-772
Authors: David A. Malueg and Shunichi O. Tsutsui
Title: Dynamic R&D Competition with Learning
Abstract: To account for the possibility that firms are unsure about the ease of innovation, we formulate a differential game of R&D competition with an unknown hazard rate. We show, as time passes with success, firms become more pessimistic about eventual innovation, reducing their R&D investment and possibly exiting the race. An increase in the number of competing firms tends to increase firms' R&D intensities, for given beliefs, but because beliefs evolve at different rates depending on the number of firms in the race, time paths of R&D investment intensity are not unambiguously ordered with respect to the number of competing firms.
JEL Classification
Management of Technological Innovation and R&D (O320)
Search, Learning,
and Information (D830)
Research and Development (6212)
Theory of
Uncertainty and Information (0261)