The Role of Information in Multistage R&D Races

  • Quem: Angelo Polydoro
  • Onde: FGV, sala 317
  • Quando: 12 de Maio de 2011 às 16:00h

R&D races typically involve the development of several intermediate steps and in some industries information about the competitor’s development stage is strategic. This paper defines and shows the existence of equilibrium for the incomplete information multistage R&D race model where firms need to complete a finite number of intermediate steps before the product or project is finished. In our model, there is incomplete information because firms may not know the competitor’s development stage during the race. By using numerical methods, we study the equilibrium of this race in pure Markov strategies. We show how the race duration, consumer surplus, firm value and total welfare vary with investment costs, market size and intensity of competition in the products market. We are able to assess the impact of a strong patent regime in terms of consumer surplus, firm value and total welfare.

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