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Dynamic R&D Competition under Uncertainty and Strategic Disclosure

Speaker: Yangbo Song
Speaker Intro:

Assistant Professor, School of Management and Economics, CUHK Shenzhen

Yangbo Song'CV


Host: Menghan Xu

We study a model of dynamic two-stage R&D competition where the competing firms are uncertain about the difficulty of the first stage. Staying in the competition is costly and a firm can also choose whether and when to quit. When a firm solves the first stage, it can choose whether and when to disclose the solution, which generates revenue but also benefits the opponent. We characterize a unique symmetric equilibrium for homogeneous firms, in which each firm will disclose the solution to the first stage if it arrives early, withhold the solution if it arrives neither too soon nor too late, and exit the competition if it has not arrived after a sufficiently long time.  From a social welfare perspective, a competition is surprisingly not always optimal even without any possibility of duplicated work: in certain scenarios, it is socially more desirable to assign the R&D project to a single firm. When firms are heterogeneous, a cost advantage always leads to an information advantage in equilibrium. 

Time: 2017-03-23(Thursday)16:40-18:00
Venue: N303, Econ Building
Organizer: WISE & SOE