Innovative Activity with Sunk Cost

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Innovative Activity with Sunk Cost

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Title: Innovative Activity with Sunk Cost
Author: Kaplan, Todd R.
Luski, Israel
Wettstein, David
Citation: International Journal of Industrial Organization, Vol. 21(8), October 2003, p. 1111-1133
Publisher: Elsevier
Journal: International Journal of Industrial Organization
Date Issued: 2003-10
DOI: doi:10.1016/S0167-7187(03)00033-X
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.
Type: Article
Keywords: InnovationSunk costsAll-pay auctionsresearch and development
ISSN: 0167-7187

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