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R&D in a duopoly under incomplete information
Author(s) -
Chatterjee Rittwik,
Chattopadhyay Srobonti,
Kabiraj Tarun
Publication year - 2019
Publication title -
international journal of economic theory
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.351
H-Index - 11
eISSN - 1742-7363
pISSN - 1742-7355
DOI - 10.1111/ijet.12174
Subject(s) - duopoly , cournot competition , microeconomics , economics , information asymmetry , incentive , investment (military) , dimension (graph theory) , complete information , mathematics , combinatorics , politics , political science , law
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.