On Robust Asymmetric Equilibria in Asymmetric R&D-Driven Growth Economies

MPRA Paper from University Library of Munich, Germany

Abstract: In an R&D-driven growth model with asymmetric fundamentals the steady state equilibrium R&D investments are industry-specific and they are such that R&D returns are equalized across industries. Return equalization, however, makes investors indifferent as to where to target research and, hence, the problem of allocation of R&D investments across industries is indeterminate. Agents' indifference creates an ambiguous investment scenario. We assume that agents hold "ambiguous" beliefs on the per-industry profitability of their R&D investments. Investors' aversion towards ambiguity (in the sense of Gilboa-Schmeidler, 1989) eliminates the indeterminacy of the R&D investment problem. In particular, we prove that the asymmetric return-equalizing equilibrium is robust against a however small degree of investors' aversion to ambiguity.

Keywords: R&D driven growth models; symmetry/asymmetry; ambiguity (search for similar items in EconPapers)
JEL-codes: D81 O32 O41 (search for similar items in EconPapers)
Date: 2009-09
New Economics Papers: this item is included in nep-dge, nep-ino, nep-ipr and nep-pr~
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: On robust asymmetric equilibria in asymmetric R&D-driven growth economies (2011)
Working Paper: On Robust Asymmetric Equilibria in Asymmetric R&D-Driven Growth Economies (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:17171

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