Posted: 28 Oct 2008
Date Written: May 2008
The paper analyzes the effects of more intense competition on firms' incentives to invest in process innovations. We carry out experiments based on two-stage games, where R&D investment choices are followed by product market competition. As predicted by theory, an increase in the number of firms from two to four reduces investments. However, a positive effect is observed for a switch from Cournot to Bertrand, even though theory predicts a negative effect in the four-player case.
Suggested Citation: Suggested Citation
Schmutzler, Armin, Competition and Innovation: An Experimental Investigation (May 2008). Available at SSRN: https://ssrn.com/abstract=1291055