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. © 2010 Springer-Verlag.
On robust asymmetric equilibria in asymmetric R&D-driven growth economies / Paolo E., Giordani; Zamparelli, Luca. - In: DECISIONS IN ECONOMICS AND FINANCE. - ISSN 1593-8883. - STAMPA. - 34:1(2011), pp. 67-84. [10.1007/s10203-010-0109-4]
On robust asymmetric equilibria in asymmetric R&D-driven growth economies
ZAMPARELLI, LUCA
2011
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. © 2010 Springer-Verlag.I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.