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Learning, Preemption, and the Degree of Rivalry

Chester S. Spatt and Frederic P. Sterbenz
The RAND Journal of Economics
Vol. 16, No. 1 (Spring, 1985), pp. 84-92
Published by: Wiley on behalf of RAND Corporation
Stable URL: http://www.jstor.org/stable/2555590
Page Count: 9
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Learning, Preemption, and the Degree of Rivalry
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Abstract

We examine a model in which all firms receive common signals as to the uncertain profitability of an investment whose actual payoffs are split only among those who develop the project earliest. The benefit from preempting rivals yields an equilibrium reduction in the amount of learning and earlier development as the number of rivals increases. The set of equilibria shrinks as the number of rivals gets large, and in the limit only the competitive outcome occurs.

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