Stability in the Patent Race Contest of Lee and Wilde
Posted: 21 Sep 1999
To determine how expenditure and profits vary with the number of firms in the patent race contest of Lee and Wilde, it is traditional to impose an ad-hoc stability condition on the best response function. This paper relates the stability condition to the standard myopic adjustment mechanism and shows that a concave hazard rate function with non-increasing hazard rate elasticity is sufficient for the analysis. We provide examples and reveal additional qualitative properties of the Lee and Wilde model.
JEL Classification: C62, O34
Suggested Citation: Suggested Citation