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On Optimal Leader’s Investments Strategy in a Cyclic Model of Innovation Race with Random Inventions Times

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  • Sergey M. Aseev

    (Steklov Mathematical Institute of RAS, Gubkina 8, 119991 Moscow, Russia
    Lomonosov Moscow State University, Leninskiye Gory, 119991 Moscow, Russia
    International Institute for Applied Systems Analysis, A-2361 Laxenburg, Austria)

  • Masakazu Katsumoto

    (International Institute for Applied Systems Analysis, A-2361 Laxenburg, Austria
    Kyoto Institute of Technology, Matsugasaki, Sakyo-ku, Kyoto 606-8585, Japan)

Abstract

In this paper, we develop a new dynamic model of optimal investments in R&D and manufacturing for a technological leader competing with a large number of identical followers on the market of a technological product. The model is formulated in the form of the infinite time horizon stochastic optimization problem. The evolution of new generations of the product is treated as a Poisson-type cyclic stochastic process. The technology spillovers effect acts as a driving force of technological change. We show that the original probabilistic problem that the leader is faced with can be reduced to a deterministic one. This result makes it possible to perform analytical studies and numerical calculations. Numerical simulations and economic interpretations are presented as well.

Suggested Citation

  • Sergey M. Aseev & Masakazu Katsumoto, 2020. "On Optimal Leader’s Investments Strategy in a Cyclic Model of Innovation Race with Random Inventions Times," Games, MDPI, vol. 11(4), pages 1-21, November.
    • Handle: RePEc:gam:jgames:v:11:y:2020:i:4:p:52-:d:445794
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    References listed on IDEAS

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