Go for broke or play it safe? Dynamic competition with choice of variance

• 成果类型: Article
• 署名作者: Anderson, Axel; Cabral, Luis M. B.
• 署名单位: Georgetown University; New York University
• 刊物名称: RAND JOURNAL OF ECONOMICS
• ISSN/ISSBN: 0741-6261
• 发表日期: 2007
• 页码: 593-609
• 关键词: research-and-development; market dominance; continuous-time; industry; games; RACE

摘要

We consider a differential game in which the joint choices of the two players influence the variance, but not the mean, of the one-dimensional state variable. We show that a pure strategy perfect equilibrium in stationary Markov strategies (ME) exists and has the property that patient players choose to play it safe when sufficiently ahead and to take risks when sufficiently behind. We also provide a simple condition that implies both players choose risky strategies when neither one is too far ahead, a situation that ensures a dominant player emerges quickly.