Durable Goods, Market Structure and the Incentives to Innovate
AbstractA commonly-cited finding in the innovation literature is that a monopoly tends to innovate too little. This paper demonstrates that a monopoly may devote more resources to innovation than is socially optimal if it produces a durable good. This possibility occurs because durability creates new innovation incentives. Once an initial stock of a durable good has been produced, the monopoly faces a residual demand for the good. Innovation may allow the monopoly to more profitably exploit this residual demand, and this ability may lead the monopoly to devote more resources to innovation than is socially optimal. Copyright 1987 by The Review of Economic Studies Limited.
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Bibliographic InfoArticle provided by London School of Economics and Political Science in its journal Economica.
Volume (Year): 54 (1987)
Issue (Month): 213 (February)
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- Usategui Díaz de Otalora, José María, 2001. "Commitment Power in a Non-Stationary Durable-Good Market," BILTOKI 2001-08, Universidad del País Vasco - Departamento de Economía Aplicada III (Econometría y Estadística).
- Jong-Hee Hahn & Jin-Hyuk Kim, 2012. "Monopoly R&D and Compatibility Decisions in Network Industries," Working papers 2012rwp-43, Yonsei University, Yonsei Economics Research Institute.
- Gregory Goering & Michael Pippenger, 2003. "Dynamic consistency and monopoly," Atlantic Economic Journal, International Atlantic Economic Society, vol. 31(2), pages 188-194, June.
- Usategui Díaz de Otalora, José María, 2006. "Non-Stationary Demand in a Durable Goods Monopoly," DFAEII Working Papers 2006-05, University of the Basque Country - Department of Foundations of Economic Analysis II.
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