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- Title
A Dynamic Model of Competitive Entry Response.
- Authors
Selove, Matthew
- Abstract
Idevelop a dynamic investment game with a "memoryless" research and development process in which an incumbent and an entrant can invest in a new technology, and the entrant can also invest in the old technology. I show that an increase in the probability of successfully implementing a technology can cause the incumbent to reduce its investment. Under certain conditions, if the success probability is high, the incumbent allows the entrant to win the new technology so that firms reach an equilibrium in which they use different technologies, and threats of retaliation prevent attacks; but if the success probability is low, such an equilibrium cannot be sustained, and both firms eventually implement both technologies.
- Subjects
ECONOMIC competition; MATHEMATICAL models of investments; NEW product development; ECONOMIC equilibrium; DYNAMIC models
- Publication
Marketing Science, 2014, Vol 33, Issue 3, p353
- ISSN
0732-2399
- Publication type
Article
- DOI
10.1287/mksc.2013.0827