We develop a dynamic duopoly, in which firms have to take into account a technological externality that reduces their innovation costs over time and an inter-firm spillover, that lowers only the second comer's R&D cost. This spillover exerts its effect after a disclosure lag. We identify three possible equilibria, which are classified, according to the timing of R&D investments, as early, intermediate, and late. The intermediate equilibrium is subgame perfect for a wide parameter range. When the innovation size is large, it implies under-investment. Hence, even in the presence of a moderate degree of inter-firm spillover, the competitive equilibrium calls for public policies aimed at increasing the research activity. When we focus on minor innovations --- the case in which, according to the earlier literature, the market equilibrium underinvests --- our results imply that the policies aimed at stimulating R&D have to be less sizeable than suggested before.
|Numero di pagine
|Rivista Internazionale di Scienze Sociali
|Stato di pubblicazione
|Pubblicato - 2010
- disclosure lag