Incentives to Innovate in Oligopolies

CORE Discussion Paper No. 2006/14

32 Pages Posted: 15 Jul 2006

See all articles by Paul Belleflamme

Paul Belleflamme

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

Multiple version iconThere are 2 versions of this paper

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

Belleflamme, Paul and Vergari, Cecilia, Incentives to Innovate in Oligopolies (February 2006). Available at SSRN: https://ssrn.com/abstract=914152 or http://dx.doi.org/10.2139/ssrn.914152

Paul Belleflamme (Contact Author)

CORE and Louvain School of Management, UCL (Université Catholique de Louvain) ( email )

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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 )

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Bologna, 40100
Italy

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