Competition in Product Design: An Experiment Exploring Innovation Behavior
Friedrich Schiller University Jena
Max Planck Institute of Economics; CESifo (Center for Economic Studies and Ifo Institute)
University of Hamburg - School of Business, Economics and Social Sciences; Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Research on Collective Goods
Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Economics
May 7, 2007
Jena Economic Research Paper No. 2007-014
We experimentally investigate competition in innovation in a patent race scenario. Pairs of subjects compete as seller firms on a duopoly market, engaging in risky search investments. Successful innovation is rewarded through temporary monopoly rents. Throughout the interaction, subjects receive feedback on own and other's search success and profit margin. Partitioning subjects into subgroups of investor types reveals that the majority of subjects condition investments on the degree of competition as measured by sales shares, while for others no correlation is ascertained. Heterogeneity in individual risk attitudes and differing experiences with related search tasks may explain this finding.
Number of Pages in PDF File: 27
Keywords: innovation, competition, imitation, patent race
JEL Classification: D81, L11, O31
Date posted: October 5, 2007 ; Last revised: September 3, 2013
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