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http://ssrn.com/abstract=1581456
 
 

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Monopoly and Incentives to Cost-Reducing R&D


Paolo G. Garella


University of Milan - Dipartimento di Scienze Economiche, Aziendali e Statistiche

March 20, 2010

University of Milan Department of Economics Working Paper No. 2010-06

Abstract:     
It is here shown that there exist cost innovations for which a monopolist has a higher incentive to invest than a social planner. This unveils the limits of the claim, based on Arrow (1959), that a monopoly always has a lower incentive to innovate than a social planner and therefore than socially desirable. Contrary to previous results, the comparison of incentives may also depend upon the demand function. Finally, only under a restricted domain of analysis, a rule for comparing the monopoly and the social planner incentives is derived.

Number of Pages in PDF File: 10

Keywords: Monopoly, Research and Development, Innovation.

JEL Classification: L00, L10

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Date posted: March 30, 2010 ; Last revised: December 20, 2013

Suggested Citation

Garella, Paolo G., Monopoly and Incentives to Cost-Reducing R&D (March 20, 2010). University of Milan Department of Economics Working Paper No. 2010-06. Available at SSRN: http://ssrn.com/abstract=1581456 or http://dx.doi.org/10.2139/ssrn.1581456

Contact Information

Paolo G. Garella (Contact Author)
University of Milan - Dipartimento di Scienze Economiche, Aziendali e Statistiche ( email )
via Conservatorio 7
Milano, 20122
Italy
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