A mean field game model of firm-level innovation

Knowledge spillovers occur when a firm researches new technology and that is adapted or adopted by another firm, resulting in social value of the larger than initially predicted private value. As result, firms systematically under-invest research compared with socially optimal investment strategy. Understanding level under-investment, as well policies to correct it, an area active economic research. In this paper, we develop model spillovers, taking inspiration from available microeconomic data. The developed mean field game model, which allows for heterogeneity productivity novel approach describing sector-level spillovers. constructed network interacting firms, whose connections represent knowledge transfers. We prove existence uniqueness solutions conduct some initial simulations understand how indirect contribute sector.