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Decisions in Economics and Finance

, Volume 34, Issue 1, pp 67–84 | Cite as

On robust asymmetric equilibria in asymmetric R&D-driven growth economies

  • Paolo E. GiordaniEmail author
  • Luca Zamparelli
Article

Abstract

In R&D-driven growth models with asymmetric fundamentals, the steady-state equilibrium R&D investments are industry-specific, and they are such that R&D returns are equalized across industries. Return equalization, however, makes investors indifferent as to where to target research and, hence, the problem of allocation of R&D investments across industries is indeterminate. Agents’ indifference creates an ambiguous investment scenario. We assume that agents hold “ambiguous” beliefs on the per-industry profitability of their R&D investments. Investors’ aversion towards ambiguity eliminates the indeterminacy of the investment problem. In particular, the asymmetric return-equalizing equilibrium is robust against a however small degree of investors’ ambiguity aversion.

Keywords

R&D driven growth models Ambiguity Ambiguity attitude \({\varepsilon}\) -contamination 

JEL Classification

032 041 D81 

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Copyright information

© Springer-Verlag 2010

Authors and Affiliations

  1. 1.Department of Economics and BusinessLUISS “Guido Carli” UniversityRomaItaly
  2. 2.Department of Economic TheoryUniversity of Rome “La Sapienza”RomaItaly

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