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Dynamic Product Reliability Management for a Firm with a Complacent Competitor vs. a Lockstep Competitor

Author

Listed:
  • Jannett Highfill

    (Bradley University)

  • Michael McAsey

    (Bradley University)

Abstract

Consider a dynamic duopoly model where R&D spending is used to increase the reliability of a firm's product under two competitive scenarios: the home firm competes with a "complacent" foreign firm that does no R&D whatsoever or with a "lockstep" foreign firm that improves its product at exactly the same rate as the home firm. The paper suggests that a firm with a complacent competitor produces a more reliable product, does more R&D, and earns more profit than a firm with a lockstep competitor. On the other hand, sufficiently less R&D spending is required that profits per R&D dollar are greater in the lockstep scenario. Extensions of the basic model include changes in the planning period, introducing trade costs, and considering intermediate competitive scenarios.

Suggested Citation

  • Jannett Highfill & Michael McAsey, 2010. "Dynamic Product Reliability Management for a Firm with a Complacent Competitor vs. a Lockstep Competitor," Journal of Economic Insight, Missouri Valley Economic Association, vol. 36(1), pages 29-54.
    • Handle: RePEc:mve:journl:v:36:y:2010:i:1:p:29-54
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    Citations

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    Cited by:

    1. Highfill Jannett & McAsey Michael, 2011. "Will Technological Progress Cure the "Advanced Technology Products" Trade Account Deficit?," Global Economy Journal, De Gruyter, vol. 10(4), pages 1-13, January.
    2. Jannett Highfill & Michael McAsey, 2013. "Welfare Measures in Dynamic Firm R&D Games," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 19(4), pages 439-449, November.
    3. repec:kap:iaecre:v:16:y:2010:i:3:p:243-256 is not listed on IDEAS
    4. Jannett Highfill & Michael McAsey, 2010. "Firm Metrics with Continuous R&D, Quality Improvement, and Cournot Quantities," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 16(3), pages 243-256, August.
    5. Jannett Highfill & Michael McAsey, 2013. "Dynamic Firm R&D Games: Manufacturing Costs and Reliability Paths," Review of Economics & Finance, Better Advances Press, Canada, vol. 3, pages 1-14, February.
    6. Jannett Highfill & Michael McAsey, 2018. "Product Reliability, R&D, and Manufacturing Cost Shocks," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 46(1), pages 27-42, March.

    More about this item

    JEL classification:

    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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