In R&D-driven growth models 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 eliminates the indeterminacy of the investment problem. In particular, the asymmetric return-equalizing equilibrium is robust against a however small degree of investors' ambiguity aversion.
On Robust Asymmetric Equilibria in Asymmetric R&D-Driven Growth Economies / Giordani, Paolo; Zamparelli, Luca. - No. 17171:(2009).
On Robust Asymmetric Equilibria in Asymmetric R&D-Driven Growth Economies
GIORDANI, PAOLO;ZAMPARELLI, LUCA
2009
Abstract
In R&D-driven growth models 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 eliminates the indeterminacy of the investment problem. In particular, the asymmetric return-equalizing equilibrium is robust against a however small degree of investors' ambiguity aversion.File | Dimensione | Formato | |
---|---|---|---|
MPRA_paper_17171[1].pdf
Open Access
Tipologia:
Documento in Pre-print
Licenza:
DRM (Digital rights management) non definiti
Dimensione
258.2 kB
Formato
Adobe PDF
|
258.2 kB | Adobe PDF | Visualizza/Apri |
Pubblicazioni consigliate
I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.