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R&D Competition when firms Choose Variance
Author(s) -
Cabral Luís M. B.
Publication year - 2003
Publication title -
journal of economics and management strategy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.672
H-Index - 68
eISSN - 1530-9134
pISSN - 1058-6407
DOI - 10.1111/j.1430-9134.2003.00139.x
Subject(s) - intuition , variance (accounting) , nothing , competition (biology) , economics , microeconomics , mathematical economics , epistemology , philosophy , ecology , accounting , biology
I consider an infinite‐period race where players choose between low‐ and high‐variance motion technologies. I provide sufficient conditions under which, in equilibrium, the leader chooses a safe technology and the laggard a risky one, thus formalizing the sports intuition that the laggard has nothing to lose. Various examples and empirical implications are presented.