Innovation and Natural Resources: A Dynamic Game with Uncertainty.

Journal article

The authors analyze a dynamic game between a resource-exporting country and an importing country that is seeking to invent a substitute technology. The time of innovation is an uncertain function of the importer's R&D; efforts, which cannot be committed in advance. The game has a unique equilibrium in Markov strategies. The importer's R&D; efforts grow over time. The exporter's output often decreases with time before innovation occurs but strategic factors imply that the opposite can happen. The output path is characterized by a simple modification of Hotelling's rule to account for uncertainty and strategic behavior.

Authors: Harris, C; Vickers, J

• Journal: RAND Journal of Economics
• Volume: 26
• Publication date: 1995-01-01
• ISSN: 0741-6261
• Language: English