Download This PaperIncentives to Innovate in Oligopolies
CORE Discussion Paper No. 2006/14
32 Pages Posted: 15 Jul 2006
Date Written: February 2006
Abstract
In the spirit of Arrow (1962), we examine, in an oligopoly model with horizontally differentiated products, how much a firm is willing to pay or 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.
Keywords: innovation, profit incentive, oligopoly, product differentiation
JEL Classification: L13, O31
Suggested Citation: Suggested Citation
CESifo (Center for Economic Studies and Ifo Institute)
Poschinger Str. 5
Munich, DE-81679
Germany
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