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
Metroeconomica, Vol. 60, Issue 4, pp. 724-752, November 2009
We experimentally investigate competition for innovations in a patent race scenario. Pairs of subjects compete as seller firms on a duopoly market, investing in risky search. Successful innovations resulting thereof are rewarded via temporary monopoly rents. Classifying investor types reveals that most of them invest according to objective investment criteria, such as probability of search success and cash flow, as well as to non-pecuniary criteria, such as intensity of competition and relative performance. For a minority, however, no such correlation is ascertained.
Number of Pages in PDF File: 29
Date posted: October 13, 2009
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