Resource allocation in an asymmetric technology race with temporary advantages

We consider two opponents that compete in developing asymmetric technologies where each party's technology is aimed at damaging (or neutralizing) the other's technology. The situation we consider is different than the classical problem of commercial R&D races in two ways: First, while in commercial R&D races the competitors compete over the control of market share, in our case the competition is about the effectiveness of technologies with respect to certain capabilities. Second, in contrast with the “winner‐takes‐all” assumption that characterizes much of the literature on this field in the commercial world, we assume that the party that wins the race gains a temporary advantage that expires when the other party develops a superior technology. We formulate a variety of models that apply to a one‐sided situation, where one of the two parties has to determine how much to invest in developing a technology to counter another technology employed by the other party. The decision problems are expressed as (convex) nonlinear optimization problems. We present an application that provides some operational insights regarding optimal resource allocation. We also consider a two‐sided situation and develop a Nash equilibrium solution that sets investment values, so that both parties have no incentive to change their investments. © 2012 Wiley Periodicals, Inc. Naval Research Logistics 59: 128–145, 2012