Abstract
We analyze innovative activity in a general framework with time-dependent rewards and sunk costs. When firms are identical, innovation is delayed by an increase in the number of firms or a decrease in the size of the reward. When one firm has higher profit potential, it is more likely to innovate first. Our framework generalizes an all-pay auction; however, we show that under certain conditions there is qualitatively different equilibrium behavior.
| Original language | English |
|---|---|
| Pages (from-to) | 1111-1133 |
| Number of pages | 23 |
| Journal | International Journal of Industrial Organization |
| Volume | 21 |
| Issue number | 8 |
| DOIs | |
| State | Published - Oct 2003 |
| Externally published | Yes |
Bibliographical note
Funding Information:We are grateful for the insightful comments from seminar participants at Norwegian School of Economics and Business, Hebrew University, Tel-Aviv University, University of Exeter, University of Copenhagen, and Autonoma University of Barcelona. We also thank the editor and two anonymous referees for several important comments and suggestions. We acknowledge the financial support from the Monaster Center for Economic Research.
Keywords
- All-pay auctions
- Innovation
- R&D
- Races
- Sunk costs
ASJC Scopus subject areas
- Industrial relations
- Aerospace Engineering
- Economics and Econometrics
- Economics, Econometrics and Finance (miscellaneous)
- Strategy and Management
- Industrial and Manufacturing Engineering