Noncooperative Oligopoly and Preemptive Innovation Without Winner-Take-All

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Abstract
Earlier models of innovation under oligopolistic rivalry are modified to include a “share parameter” σ, describing the manner in which profits are divided among rivals when one firm is successful in its search for a valuable resource stock. There is a unique value of σ that maximizes expected industry profits, by “guiding” noncooperative oligopolists to choose the profit-maximizing exploration rate. Moreover, setting σ at this maximizing value—which always allocates some share of industry profits to the “losers” in the exploration race—leads to an exploration rate identical to what would be chosen by a jointly managed cartel.

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