PATTERNS OF TECHNOLOGICAL LEADERSHIP A SIMPLE MODEL WITH UNCERTAINTY

This paper aims at combining dynamics and uncertainty in a simple model designed to investigate the relationship between market structure and innovation. We consider the case of two firms competing in a sequence of cost-reducing technological races under uncertainty on the rival's R & D effort. Within an asymmetric duopoly it is shown under which conditions the expected evolution of technological leadership follows a pattern of Probabilistic Action-Reaction or Probabilistic Increasing Dominance.