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|Title:||Optimal R&D investment strategies with quantity competition under the threat of superior entry |
Kort, Peter M.
|Issue Date:||2005 |
|Series/Report no.:||CESifo working papers 1385|
|Abstract:||This paper studies R&D investment decisions of a firm facing the threat of new technology entry and subject to technical uncertainty. We distinguish four scenarios: inevitable entry, entry deterrence, entry blockade, and non-credible entry threat. The entry threat stimulates the incumbent to innovate in case entry prevention is possible, but discourages R&D if entry is inevitable. In the case of entry deterrence the incumbent successfully prevents entry by innovating. Greater technical uncertainty stimulates starting R&D and can result in implementation of more expensive research projects. The welfare analysis shows that the relation between welfare and entry cost and between welfare and uncertainty is nonmonotonic.|
|Subjects:||investment under uncertainty|
|Document Type:||Working Paper|
|Appears in Collections:||CESifo Working Papers, CESifo Group Munich|
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