Abstract

http://ssrn.com/abstract=1995966
 
 

References (39)



 
 

Citations (2)



 
 

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The Relationship between Market Structure and Innovation in Industry Equilibrium: A Case Study of the Global Automobile Industry


Aamir Rafique Hashmi


National University of Singapore

Johannes Van Biesebroeck


K.U.Leuven; Centre for Economic Policy Research (CEPR)

January 2012

CEPR Discussion Paper No. DP8783

Abstract:     
We first estimate a dynamic game for the global automobile industry and then compute a Markov Perfect equilibrium to study the equilibrium relationship between market structure and innovation. The key state variable in the model is the efficiency level of each firm and the market structure is characterized by the vector of efficiency levels across all firms. Efficiency is estimated to be stochastically increasing in the dynamic control - innovation - which is proxied by patenting behavior. Equilibrium innovation is a function of all state variables in the industry and the cost of R&D which includes a privately observed cost shock. We find that it exhibits the following patterns: 1) innovation by the industry leader is decreasing in the efficiency of other firms; 2) innovation is decreasing in the efficiency dispersion; 3) innovation is more concentrated that efficiency; 4) innovation is declining in the number of active firms; 5) the innovation gap between the leader and other firms increases with competition.

Number of Pages in PDF File: 42

Keywords: Competition, Dynamic game, Schumpeter

JEL Classification: C73, L13, L62, O31

working papers series


Date posted: January 31, 2012  

Suggested Citation

Hashmi, Aamir Rafique and Van Biesebroeck, Johannes, The Relationship between Market Structure and Innovation in Industry Equilibrium: A Case Study of the Global Automobile Industry (January 2012). CEPR Discussion Paper No. DP8783. Available at SSRN: http://ssrn.com/abstract=1995966

Contact Information

Aamir Rafique Hashmi (Contact Author)
National University of Singapore ( email )
1 Arts Link, AS2 #05-08
Singapore, 117570
Singapore
HOME PAGE: http://aamirhashmi.com
Johannes Van Biesebroeck
K.U.Leuven ( email )
Naamsestraat 69
B-3000 Leuven
Belgium
+3216326793 (Phone)
+3216326796 (Fax)
HOME PAGE: http://www.econ.kuleuven.be/public/N07057/
Centre for Economic Policy Research (CEPR) ( email )
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
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References:  39
Citations:  2
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