Incentives to Innovate in Oligopolies

23 Pages Posted: 30 Dec 2010  

Paul Belleflamme

GREQAM; CORE and Louvain School of Management, UCL (Université Catholique de Louvain); CESifo (Center for Economic Studies and Ifo Institute)

Cecilia Vergari

University of Bologna - Department of Economics

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Date Written: December 16, 2010

Abstract

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.

Suggested Citation

Belleflamme, Paul and Vergari, Cecilia, Incentives to Innovate in Oligopolies (December 16, 2010). The Manchester School, Vol. 79, Issue 1, pp. 6-28, 2010. Available at SSRN: https://ssrn.com/abstract=1732457 or http://dx.doi.org/10.1111/j.1467-9957.2009.02131.x

Paul Belleflamme (Contact Author)

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CESifo (Center for Economic Studies and Ifo Institute)

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Cecilia Vergari

University of Bologna - Department of Economics ( email )

Piazza Scaravilli 2
Bologna, 40100
Italy

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