Incentives to Innovate in Oligopolies
CORE and Louvain School of Management, UCL (Université Catholique de Louvain); CESifo (Center for Economic Studies and Ifo Institute)
University of Bologna - Department of Economics
December 16, 2010
The Manchester School, Vol. 79, Issue 1, pp. 6-28, 2010
In the spirit of Arrow (The Rate and Direction of Inventive Activity, Princeton, NJ, Princeton University Press, 1962), we examine, in an oligopoly model with horizontally differentiated products, how much a firm is willing to pay for a process innovation that it would be the only one to use. We show that different measures of competition (number of firms, degree of product differentiation, Cournot vs. Bertrand) affect incentives to innovate in non-monotonic, different and potentially opposite ways.
Number of Pages in PDF File: 23
Date posted: December 30, 2010