Publishing to Deter in R&D Competition1

We study a two-step R&D race between two …rms, each with private information on its own position. Each …rms can “publish,”that is, announce its own progress in a veri…able manner. Publications do not directly a¤ect the position of the rival, but only provide information on the position of the announcer and may be used strategically to induce the rival to cut the intensity of its own R&D investment. Within a certain parameter set of interest, we characterize the class of symmetric, perfect Bayesian equilibria in pure strategies satisfying a weak Markovian property of invention-date-independence. There are either one or two such equilibria. In one equilibrium, only the …rst …rm which completes the intermediate step publishes and does so immediately. In the other equilibrium, no …rm ever publishes any progress at all. Incentives and disincentives to publish are analyzed in terms of three distinct strategic e¤ects. For parameters with two equilibria, we show that the …rms’joint expected payo¤ is higher in the equilibrium with no publications, as publications are associated with overinvestment in the initial phase of the race.