An Uncertainty-Based Explanation of Symmetric
Series
Sonderforschungsbereich 504
Type
discussion paper
Date Issued
2006
Author(s)
Abstract
We provide a re-foundation of the symmetric growth equilibrium character-
izing the research sector of all vertical R&D-driven growth models. This result
does not rely on the usual assumption of a symmetric expectation on the future
per-sector R&D expenditure. Indeed, with this structure of expectations, returns
in R&D are equalized, and agents turn out to be indi¤erent as to where targeting
research: hence, the problem of the allocation of R&D investments across sec-
tors is indeterminate. In line with the ?true?Schumpeterian perspective, we solve
this indeterminacy by allowing for decision makers strictly uncertain about the
future per-sector distribution of R&D e¤orts. By using the Gilboa-Schmeidler?s
MEU decision rule, we prove that the symmetric structure of R&D investment is
the unique rational expectations (RE) equilibrium compatible with uncertainty-
averse agents adopting a maximin strategy.
izing the research sector of all vertical R&D-driven growth models. This result
does not rely on the usual assumption of a symmetric expectation on the future
per-sector R&D expenditure. Indeed, with this structure of expectations, returns
in R&D are equalized, and agents turn out to be indi¤erent as to where targeting
research: hence, the problem of the allocation of R&D investments across sec-
tors is indeterminate. In line with the ?true?Schumpeterian perspective, we solve
this indeterminacy by allowing for decision makers strictly uncertain about the
future per-sector distribution of R&D e¤orts. By using the Gilboa-Schmeidler?s
MEU decision rule, we prove that the symmetric structure of R&D investment is
the unique rational expectations (RE) equilibrium compatible with uncertainty-
averse agents adopting a maximin strategy.
Language
English
Keywords
R&D-Driven GrowthModels
Multi-Prior Beliefs
Maxmin Strategy
Symmetric Equilibrium.
HSG Classification
contribution to scientific community
HSG Profile Area
SEPS - Economic Policy
Refereed
No
Publisher
Universit ¨at Mannheim
Number
06-08
Start page
19
Subject(s)
Eprints ID
222131
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dpMannheim 06-08.pdf
Size
222.62 KB
Format
Adobe PDF
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