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ifo Institut – Leibniz-Institut für Wirtschaftsforschung an der Universität München >
CESifo Working Papers, CESifo Group Munich >
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http://hdl.handle.net/10419/18749
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| Title: | | Optimal R&D investment strategies with quantity competition under the threat of superior entry  |
| Authors: | | Lukach, Ruslan Kort, Peter M. Plasmans, Joseph |
| 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 real options R&D competition |
| JEL: | | D21 C72 O31 |
| Document Type: | | Working Paper |
| Appears in Collections: | | CESifo Working Papers, CESifo Group Munich
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