Competitive experimentation with private information: The survivor's curse

We study a winner-take-all R&D race between two firms that are privately informed about the arrival rate of an invention. Over time, each firm only observes whether the opponent left the race or not. The equilibrium displays a strong herding effect, that we call a 'survivor's curse.' Unlike in the case of symmetric information, the two firms may quit the race (nearly) simultaneously even when their costs and benefits for research differ significantly.

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Year of publication:	2010
Authors:	Moscarini, Giuseppe ; Squintani, Francesco
Published in:	Journal of Economic Theory. - Elsevier, ISSN 0022-0531. - Vol. 145.2010, 2, p. 639-660
Publisher:	Elsevier
Keywords:	Learning Experimentation Private information Survivor's curse

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Type of publication:	Article
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10008507127