Innovative Activity with Sunk Cost
Kaplan, Todd R.; Luski, Israel; Wettstein, David
Date: 1 October 2003
Journal
International Journal of Industrial Organization
Publisher
Elsevier
Publisher DOI
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 ...
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.
Economics
Faculty of Environment, Science and Economy
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