A Prospect Theoretical Model of Competition and Innovation

Authors

KRČÁL Ondřej

Year of publication 2010
Type Article in Proceedings
Conference New Economic Challenges, 2nd International PHD Students Conference
MU Faculty or unit

Faculty of Economics and Administration

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.

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