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Races of Research and Development between Firms with Different Incentives to Innovate

Published online by Cambridge University Press:  17 August 2016

Flavio Delbono  and
Vincenzo Denicolò
Flavio Delbono
Affiliation:
Università di Verona
Vincenzo Denicolò
Affiliation:
Università di Parma
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Summary

In this paper we study a one-shot game of R & D between two firms which differ in their incentives to innovate. We analyse this problem when the R & D technology displays smoothly decreasing returns as well as when increasing returns in the form of indivisibilities prevail. In the first case we show that the magnitude of the ratio between the discount rate and the productivity of R & D expenditure may be a critical parameter in ranking firms' probabilities of winning the race. In the second case, we prove that the firm with the higher profit incentive invests in R & D at least as much as the firm with the higher competitive threat. We then apply these results to a homogeneous duopoly under Bertrand or Cournot competition in the product market.

Résumé

Résumé

Dans cet article nous étudions un jeu non-répété de R & D entre deux firmes qui ont des incitations à innover différentes. Le problème est étudié dans un double contexte: rendements décroissants (d'une manière continue) et rendements croissants (prenant la forme d'indivisibilités). Dans le premier cas nous montrons que la grandeur du rapport entre le taux d'actualisation et la productivité des dépenses en R& D est un paramètre crucial pour la détermination de la probabilité de victoire de chaque firme. Dans le second cas, on prouve que la firme ayant la plus grande espérance de profit investit en R & D au moins autant que l'entreprise qui est confrontée à la menace concurrentielle la plus forte. Ces résultats sont ensuite appliqués an cas d'un duopole homogène avec une concurrence à la Bertrand ou à la Cournot sur le marché du produit.

Keywords

621621
Type
Research Article
Information
Recherches Économiques de Louvain/ Louvain Economic Review , Volume 57 , Issue 2 , 1991 , pp. 103 - 123
Copyright
Copyright © Université catholique de Louvain, Institut de recherches économiques et sociales 1991 

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Footnotes

(*)

We thank two anonymous referees for many helpful comments. The usual disclaimer applies.

References

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