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Incentives To Innovate In Oligopolies

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  • PAUL BELLEFLAMME
  • CECILIA VERGARI

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 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-monotoic, different, and potentially ways.

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File URL: http://hdl.handle.net/10.1111/j.1467-9957.2009.02131.x
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Bibliographic Info

Article provided by University of Manchester in its journal The Manchester School.

Volume (Year): 79 (2011)
Issue (Month): 1 (January)
Pages: 6-28

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Handle: RePEc:bla:manchs:v:79:y:2011:i:1:p:6-28

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  1. d'Aspremont, Claude & Jacquemin, Alexis, 1988. "Cooperative and Noncooperative R&D in Duopoly with Spillovers," American Economic Review, American Economic Association, vol. 78(5), pages 1133-37, December.
  2. Bester, H. & Petrakis, E., 1991. "The Incentives for Cost Reduction in a Differentiated Industry," Papers 9136, Tilburg - Center for Economic Research.
  3. Qiu, Larry D., 1997. "On the Dynamic Efficiency of Bertrand and Cournot Equilibria," Journal of Economic Theory, Elsevier, vol. 75(1), pages 213-229, July.
  4. Spence, Michael, 1984. "Cost Reduction, Competition, and Industry Performance," Econometrica, Econometric Society, vol. 52(1), pages 101-21, January.
  5. AMIR, Rabah & EVSTIGNEEV, Igor & WOODERS, John, 2001. "Noncooperative versus cooperative R&D with endogenous spillover rates," CORE Discussion Papers 2001050, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  6. Yi, Sang-Seung, 1999. "Market structure and incentives to innovate: the case of Cournot oligopoly," Economics Letters, Elsevier, vol. 65(3), pages 379-388, December.
  7. James A. Brander & Barbara J. Spencer, 1983. "Strategic Commitment with R&D: The Symmetric Case," Bell Journal of Economics, The RAND Corporation, vol. 14(1), pages 225-235, Spring.
  8. Lin, Ping & Saggi, Kamal, 2002. "Product differentiation, process R&D, and the nature of market competition," European Economic Review, Elsevier, vol. 46(1), pages 201-211, January.
  9. Masahiro Okuno-Fujiwara & Kotaro Suzumura, 1990. "Strategic Cost-Reduction Investment and Economic Welfare," Discussion Paper Series a217, Institute of Economic Research, Hitotsubashi University.
  10. Kamien, Morton I & Tauman, Yair, 2002. "Patent Licensing: The Inside Story," Manchester School, University of Manchester, vol. 70(1), pages 7-15, January.
  11. Piercarlo Zanchettin, 2006. "Differentiated Duopoly with Asymmetric Costs," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 15(4), pages 999-1015, December.
  12. Boone, Jan, 2001. "Intensity of competition and the incentive to innovate," International Journal of Industrial Organization, Elsevier, vol. 19(5), pages 705-726, April.
  13. Nirvikar Singh & Xavier Vives, 1984. "Price and Quantity Competition in a Differentiated Duopoly," RAND Journal of Economics, The RAND Corporation, vol. 15(4), pages 546-554, Winter.
  14. Bonanno, Giacomo & Haworth, Barry, 1998. "Intensity of competition and the choice between product and process innovation," International Journal of Industrial Organization, Elsevier, vol. 16(4), pages 495-510, July.
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Cited by:
  1. Benjamin Rene Kern & Juan Manuel Mantilla Contreras, 2014. "Mergers and the Incentives to Undertake Product Innovation Oriented R&D: First Steps Towards an Assessment Approach," MAGKS Papers on Economics 201417, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
  2. Daria Onori, 2013. "Competition and Growth: Reinterpreting their Relationship," AMSE Working Papers 1324, Aix-Marseille School of Economics, Marseille, France.
  3. Francisco Martínez-Sánchez, 2007. "The Role of an Imitating Firm in a Dynamic Context," REVISTA LECTURAS DE ECONOMÍA, UNIVERSIDAD DE ANTIOQUIA - CIE.
  4. Nicola Lacetera & Lorenzo Zirulia, 2011. "Individual Preferences, Organization, and Competition in a Model of R&D Incentive Provision," NBER Working Papers 17031, National Bureau of Economic Research, Inc.
  5. Steinmetz, Alexander, 2010. "Competition, innovation, and the effect of knowledge accumulation," W.E.P. - Würzburg Economic Papers 81, University of Würzburg, Chair for Monetary Policy and International Economics.
  6. N. Lacetera & L. Zirulia, 2008. "Knowledge Spillovers, Competition, and R&D Incentive Contracts," Working Papers 624, Dipartimento Scienze Economiche, Universita' di Bologna.
  7. Philipp Weinscheink, 2010. "Entry and Incumbent Innovation," Working Paper Series of the Max Planck Institute for Research on Collective Goods 2010_17, Max Planck Institute for Research on Collective Goods.
  8. Nie, Pu-yan, 2013. "Duopoly quality commitment," Economic Modelling, Elsevier, vol. 33(C), pages 832-842.

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