Innovative activity and sunk cost

Todd R. Kaplan, Israel Luski, David Wettstein

Research output: Contribution to journalArticlepeer-review

37 Scopus citations

Abstract

We analyze innovative activity in a general framework with time-dependent rewards and sunk costs. When firms are identical, innovation is delayed by an increase in the number of firms or a decrease in the size of the reward. When one firm has higher profit potential, it is more likely to innovate first. Our framework generalizes an all-pay auction; however, we show that under certain conditions there is qualitatively different equilibrium behavior.

Original languageEnglish
Pages (from-to)1111-1133
Number of pages23
JournalInternational Journal of Industrial Organization
Volume21
Issue number8
DOIs
StatePublished - 1 Jan 2003

Keywords

  • All-pay auctions
  • Innovation
  • R&D
  • Races
  • Sunk costs

ASJC Scopus subject areas

  • Industrial relations
  • Aerospace Engineering
  • Economics and Econometrics
  • Economics, Econometrics and Finance (miscellaneous)
  • Strategy and Management
  • Industrial and Manufacturing Engineering

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