R&D in a duopoly under incomplete information. (3rd August 2018)

• Record Type: Journal Article
• Authors: Chatterjee, Rittwik; Chattopadhyay, Srobonti; Kabiraj, Tarun
• Is Part Of: International journal of economic theory. Volume 15:Number 4(2019:Dec.)
• Page Start: 341
• Page End: 359
• Publication Date: 2018-08-03
• Subjects: R&D incentive -- duopoly -- asymmetric information -- type distribution; Economics -- Periodicals; 330.01
• DOI: 10.1111/ijet.12174
• Languages: English
• ISSNs: 1742-7355

Abstract

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.