A Perpetual Race to Stay Ahead

S-Tier
Journal: Review of Economic Studies
Year: 2004
Volume: 71
Issue: 4
Pages: 1065-1088

Authors (1)

Johannes Hörner (not in RePEc)

Score contribution per author:

8.043 = (α=2.01 / 1 authors) × 4.0x S-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

Abstract

This paper presents a model of dynamic competition between two firms that repeatedly engage in an innovative activity. The state of competition—measured by the difference between the number of innovations introduced by the firms—evolves stochastically according to their effort level. The structure of Markov perfect equilibria is identified. It is generally not true that competition is fiercest when firms are closest. Rather, firms invest under two distinct circumstances: while sufficiently ahead, to outstrip their rival and secure a durable leadership; while behind, to regain leadership and prevent the situation from worsening to the point where their rival outstrips them. Copyright 2004, Wiley-Blackwell.

Technical Details

RePEc Handle
repec:oup:restud:v:71:y:2004:i:4:p:1065-1088
Journal Field
General
Author Count
1
Added to Database
2026-02-02