Competition and Innovation: An Experimental Investigation

Posted: 28 Oct 2008

See all articles by Armin Schmutzler

Armin Schmutzler

University of Zurich - Department of Economics; Centre for Economic Policy Research (CEPR)

Date Written: May 2008

Abstract

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

Schmutzler, Armin, Competition and Innovation: An Experimental Investigation (May 2008). Available at SSRN: https://ssrn.com/abstract=1291055

Armin Schmutzler (Contact Author)

University of Zurich - Department of Economics ( email )

Zürich, CH-8006
Switzerland

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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