Abstract
This paper compares the outcomes of strategic and nonstrategic research and development (R&D). Firms undertake cost-reducing R&D in an environment where benefits accrue from their rivals' R&D via a common pool of knowledge. We demonstrate that multiple suboptimal equilibria exist; under these conditions, growth models which do not consider strategic interactions will overestimate or underestimate the growth rate.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
References
Solow, R., Technical Change and the Aggregate Production Function, Review of Economic Studies, Vol. 39, pp. 312–330, 1957.
Denison, E. F., Why Growth Rates Differ, 1st Edition, The Brookings Institution, Washington, DC, 1967.
Lucas, R. E., Jr., On the Mechanics of Economic Development, Journal of Monetary Economics, Vol. 22, pp. 3–42, 1988.
Xie, D., Divergence in Economic Performance: Transitional Dynamics with Multiple Equilibria, Journal of Economic Theory, Vol. 63, pp. 97–112, 1994.
Romer, P. M., Endogenous Technological Change, Journal of Political Economy, Vol. 98, pp. S71-S102, 1990.
Barro, R. J., Government Spending in a Simple Model of Endogenous Growth, Journal of Political Economy, Vol. 98, pp. 103–125, 1990.
Stokey, L. N., Human Capital, Product Quality, and Growth, Quarterly Journal of Economics, Vol. CV12, pp. xxx-xxx, 1991.
Smulders, S., and Van de Klundert, T., Imperfect Competition, Concentration and Growth with Firm-Specific R&D, European Economic Review, Vol. 39, pp. 139–160, 1995.
Bernstein, J. I., and Nadiri, I. M., Research and Development and Intra-Industry Spillovers: An Empirical Application of Dynamic Duality, Review of Economic Studies, Vol. 56, pp. 249–269, 1989.
Nadiri, I. M., Innovations and Technological Spillovers, Research Report 93–31, C.V. Starr Center for Applied Economics, 1993.
Bernstein, J. I., Costs of Production, Intra-and Inter-Industry R&D Spillovers: Canadian Evidence, Canadian Journal of Economics, Vol. 21, pp. 325–347, 1988.
Romer, P. M., New Goods and the Welfare Costs of Trade Restrictions, Journal of Development Economics, Vol. 43, pp. 312–330, 1994.
Kamien, N. I., and Schwartz, N. L., Dynamic Optimization, the Calculus of Variations, and Optimal Control in Economics and Management, North-Holland, Amsterdam, Netherlands, 1991.
Reinganum, J., A Dynamic Game of R&D: Patent Protection and Competitive Behavior, Econometrica, Vol. 50, pp. 671–688, 1982.
Tolwinski, B., and Zaccour, G., Learning from Each Other in a Duopoly: A Numerical Approach, Journal of Optimization Theory and Applications, Vol. 63, pp. 97–112, 1995.
Tsutsui, S., and Mino, K., Nonlinear Strategies in Dynamic Duopolistic Competition with Sticky Prices, Journal of Economic Theory, Vol. 52, pp. 136–161, 1990.
Dockner, E. J., and Long, N. V., International Pollution Control: Cooperative Versus Noncooperative Strategies, Journal of Environmental Economics and Management, Vol. 25, pp. 13–29, 1993.
Author information
Authors and Affiliations
Rights and permissions
About this article
Cite this article
Vencatachellum, D. A Differential R&D Game: Implications for Knowledge-Based Growth Models. Journal of Optimization Theory and Applications 96, 175–189 (1998). https://doi.org/10.1023/A:1022623419371
Issue Date:
DOI: https://doi.org/10.1023/A:1022623419371