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Strategic Investment with Asymmetric Spillovers

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  • Raymond De Bondt
  • Irene Henriques

Abstract

This paper investigates the implications of asymmetric spillovers on noncooperative strategic investments in a duopoly with quadratic pay-offs. A unique equilibrium in the announcement of the leader/follower role exists in the case where one firm absorbs large spillovers while the other, at most, is able to receive only small spillovers. The leader in this equilibrium is the firm that absorbs the large spillovers. Other asymmetries in initial costs or efficiency in research and development do not affect this outcome.

Suggested Citation

  • Raymond De Bondt & Irene Henriques, 1995. "Strategic Investment with Asymmetric Spillovers," Canadian Journal of Economics, Canadian Economics Association, vol. 28(3), pages 656-674, August.
    • Handle: RePEc:cje:issued:v:28:y:1995:i:3:p:656-74
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