A Prospect Theoretical Model of Competition and Innovation
| Authors | |
|---|---|
| Year of publication | 2010 |
| Type | Article in Proceedings |
| Conference | New Economic Challenges, 2nd International PHD Students Conference |
| MU Faculty or unit | |
| Citation | |
| Field | Economy |
| Keywords | Innovation; Competition; Prospect Theory; Inverted-U Relationship |
| Description | In this paper, we show that different profit expectations due to different intensity of competition influence innovation decisions of otherwise identical firms. Using prospect theoretical model of decision under uncertainty, we predict an inverted-U relationship between competition and innovation frequently observed in empirical studies. |