Strategic optimization in R&D investment

Abstract

We use d'Aspremont and Jacquemin's strategic optimal R&D investment in a duopoly Cournot competition model to construct myopic optimal discrete and continuous R&D dynamics. We show that for some high initial production costs, the success or failure of a firm is very sensitive to small variations in its initial R&D investment strategies.

Keywords:

• strategic R&D
• Cournot duopoly model

AMS Subject Classifications::

• 37N40
• 91A10
• 91A25

Acknowledgements

We thank FCT for the programs POCTI and POSI and Ministério da Ciêencia, Tecnologia e do Ensino Superior, Calouste Gulbenkian Foundation and Centro de Matemática da Universidade do Minho (CMAT) for their financial support. The authors gratefully acknowledge financial support given by Laboratório de Inteligência Artificial e de Apoio à Decisãao (LIAAD/INESC TEC LA Porto).