R&D in a duopoly under incomplete information

Article Type

Research Article

Publication Title

International Journal of Economic Theory

Abstract

The availability of information about rivals may have a significant impact on a firm's decision about R&D investment. This paper investigates how the R&D incentive of a firm in a Cournot duopoly may depend on information structures. We show that asymmetric information about the rival's cost reduction may enhance the research incentive of each firm compared to the complete-information case. However, an additional dimension of asymmetry (e.g. the information about whether the rival has invested in R&D or not) will reduce the R&D incentive unambiguously compared to the one-dimensional asymmetry case.

First Page

341

Last Page

359

DOI

10.1111/ijet.12174

Publication Date

12-1-2019

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