On Optimal Leader’s Investments Strategy in a Cyclic Model of Innovation Race with Random Inventions Times

Aseev S & Katsumoto M (2020). On Optimal Leader’s Investments Strategy in a Cyclic Model of Innovation Race with Random Inventions Times. Games 11 (4): e52. DOI:10.3390/g11040052.

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Abstract

In this paper, we develop a new dynamic model of optimal investments in R&D and manufacturing for a technological leader competing with a large number of identical followers on the market of a technological product. The model is formulated in the form of the infinite time horizon stochastic optimization problem. The evolution of new generations of the product is treated as a Poisson-type cyclic stochastic process. The technology spillovers effect acts as a driving force of technological change. We show that the original probabilistic problem that the leader is faced with can be reduced to a deterministic one. This result makes it possible to perform analytical studies and numerical calculations. Numerical simulations and economic interpretations are presented as well.

Item Type: Article
Uncontrolled Keywords: R& D; stochastic innovation race; technology spillovers; imitation; optimal allocation of resources; dynamic optimization
Research Programs: Advanced Systems Analysis (ASA)
Depositing User: Luke Kirwan
Date Deposited: 17 Nov 2020 16:09
Last Modified: 17 Nov 2020 16:10
URI: http://pure.iiasa.ac.at/16847

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