Relative Performance and R&D Competition

ISER Discussion Paper No. 752

20 Pages Posted: 28 Aug 2009

See all articles by Toshihiro Matsumura

Toshihiro Matsumura

University of Tokyo - Institute of Social Science

Noriaki Matsushima

Osaka University - Institute of Social and Economic Research (ISER)

Susumu Cato

University of Tokyo

Institute of Social and Economic Research

Osaka University - Institute of Social and Economic Research (ISER)

Date Written: August 26, 2009

Abstract

This paper formulates a duopoly model in which firms care about relative profits as well as their own profits. Our purpose is to investigate the relationship between the weight of relative performance and R&D expenditure. We find a non-monotone relationship between the weight of relative performance in their objectives and their R&D levels. Both highly reciprocal (altruism) and negative reciprocal attitudes yield high levels of R&D, while the intermediate situations yield low levels of R&D.

Keywords: relative profit, innovation, spite, altruism

JEL Classification: L21, O31, L13

Suggested Citation

Matsumura, Toshihiro and Matsushima, Noriaki and Cato, Susumu and Economic Research, Institute of Social and, Relative Performance and R&D Competition (August 26, 2009). ISER Discussion Paper No. 752, Available at SSRN: https://ssrn.com/abstract=1462540 or http://dx.doi.org/10.2139/ssrn.1462540

Toshihiro Matsumura

University of Tokyo - Institute of Social Science ( email )

Hongo 7-3-1
Tokyo, TOKYO 113-0033
Japan

Noriaki Matsushima (Contact Author)

Osaka University - Institute of Social and Economic Research (ISER) ( email )

6-1 Mihogaoka
Ibaraki, Osaka 567-0047
Japan

Susumu Cato

University of Tokyo ( email )

7-3-1 Hongo
Bunkyo-ku
Tokyo, Tokyo 133-033
Japan

Institute of Social and Economic Research

Osaka University - Institute of Social and Economic Research (ISER)

6-1 Mihogaoka
Ibaraki, Osaka 567-0047
Japan
81-6-6879-8555 (Phone)
81-6-6879-8583 (Fax)

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