From Mind to Market: A Global, Dynamic Analysis of R&amp;D

Hinloopen, Jeroen; Smrkolj, Grega; Wagener, Florian

doi:10.2139/ssrn.1935916

Cited by 11 publications

(16 citation statements)

References 32 publications

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“…where k j = k j (t), j = i, is the R&D effort exerted by the rival, β ∈ [0, 1] is a degree of spillovers, and δ > 0 reflects the constant rate of efficiency reduction due to the aging of technology and organizational forgetting (Besanko et al, 2010;Hinloopen et al, 2013). 8 Moreover, the B i (t) are standard Wiener processes or Brownian motions, dB i ∼ N (0, dt), with σ i > 0 denoting their strength.…”

Section: Modelmentioning

confidence: 99%

“…This cost equals bk i (t) 2 per unit of time, where b > 0 is inversely related to the cost-efficiency of the R&D process. In assuming decreasing returns to R&D, we follow the bulk of the literature (see, e.g., d'Aspremont and Jacquemin (1988), Kamien et al (1992), Qiu (1997), or Hinloopen et al (2013)). Low values of β correspond to strong intellectual property protection and the ability of firms to prevent involuntary leaks of information.…”

Section: Modelmentioning

confidence: 99%

“…The new parameter φ introduced by the scaling transformation (cf. Lemma 1 in Hinloopen et al (2013), Lemma 2.1 in Hinloopen et al (2017)) effectively substitutes for A, b, and δ. It captures the profit potential of a technology.…”

Section: Proof See Appendix Amentioning

confidence: 99%

“…The result is a coupled system of parabolic partial differential equations for the value functions V i , i = 1, 2. For a single firm, under deterministic cost dynamics (ε = 0) there are situations where the value function is not differentiable over the entire space (Hinloopen et al, 2013), as 'indifference' or 'Skiba' points appear for certain parameter values. These are points where a firm is indifferent between developing and not developing a technology further.…”

Section: Equilibriummentioning

confidence: 99%

“…We expect the same phenomenon to occur in the case of two competing firms in the deterministic limit ε → 0. Hinloopen et al (2013) were able to show the existence of the value function using geometrical arguments. For the present dynamic game, we are not able to proceed along those lines.…”

Section: Equilibriummentioning

confidence: 99%

See 4 more Smart Citations

Research among copycats: R&D, spillovers, and feedback strategies

Smrkolj

Wagener

2019

International Journal of Industrial Organization

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We study a stochastic dynamic game of process innovation in which firms can initiate and terminate R&D efforts and production at different times. We discern the impact of knowledge spillovers on the investments in existing markets, as well as on the likely structure of newly forming markets, for all possible asymmetries between firms. While an increase in spillovers may improve the likelihood of a competitive market, it may at the same time reduce the level to which a technology is developed. We show that the relation between spillovers, R&D efforts, and surpluses depends on relative as well as absolute efficiency of firms. High spillovers are not necessarily pro-competitive as they can make it harder for the laggard to catch up with the technology leader.

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Section: Modelmentioning

confidence: 99%

Section: Modelmentioning

confidence: 99%

Section: Proof See Appendix Amentioning

confidence: 99%

Section: Equilibriummentioning

confidence: 99%

Section: Equilibriummentioning

confidence: 99%

See 3 more Smart Citations

Research among copycats: R&D, spillovers, and feedback strategies

Smrkolj

Wagener

2019

International Journal of Industrial Organization

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Numerical Analysis of Markov-Perfect Equilibria with Multiple Stable Steady States: A Duopoly Application with Innovative Firms

2016

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This paper presents a numerical method for the characterization of Markov-perfect equilibria of symmetric differential games exhibiting coexisting stable steady states. The method relying on the calculation of 'local value functions' through collocation in overlapping parts of the state space, is applicable for games with multiple state variables. It is applied to analyze a piecewise deterministic game capturing the dynamic competition between two oligopolistic firms, which are active in an established market and invest in R&D. Both R&D investment and an evolving public knowledge stock positively influence a breakthrough probability, where the breakthrough generates the option to introduce an innovative product on the market. Additionally, firms engage in activities influencing the appeal of the established and new product to consumers. Markov-perfect equilibrium profiles are numerically determined for different parameter settings and it is shown that for certain constellations the new product is introduced with probability one if the initial strength of the established market is below a threshold, which depends on the initial level of public knowledge. In case, the initial strength of the established market is above this threshold, and the R&D effort of both firms quickly goes to zero and with a high probability the new product is never introduced. Furthermore, it is shown that after the introduction of the new product the innovator engages in activities

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Delaying product introduction: A dynamic analysis with endogenous time horizon

Gezer

2019

Journal of Economic Dynamics and Control

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We consider a capital accumulating incumbent firm which produces an established product and has the option to introduce an improved substitute product to the market by incurring adoption costs. We find that depending on the initial capacities on the established market and the value of adoption costs, three scenarios are possible, namely introducing immediately, later or abstaining from product introduction. In case of delay of product introduction, the incumbent reduces capacities for the established product before the new product is introduced. We encounter Skiba points where the incumbent is indifferent between two of the three scenarios and use a bifurcation analysis in order to characterize the transition towards different steady states.

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From Mind to Market: A Global, Dynamic Analysis of R&D

Cited by 11 publications

References 32 publications

Research among copycats: R&D, spillovers, and feedback strategies

Research among copycats: R&D, spillovers, and feedback strategies

Numerical Analysis of Markov-Perfect Equilibria with Multiple Stable Steady States: A Duopoly Application with Innovative Firms

Delaying product introduction: A dynamic analysis with endogenous time horizon

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