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Innovation Complementarity in a Vertically Differentiated Monopoly

Author

Listed:
  • BANERJEE, SWAPNENDU

    (Department of Economics, Jadavpur University, Kolkata, West Bengal, India)

Abstract

In a vertically differentiated monopoly with continuous consumer types we show that a process innovation can precede and induce an otherwise unprofitable product (innovation), thus pointing towards a complementarity between these two types of innovation. With fixed innovation costs we show that this holds irrespective of whether we have full or partial market coverage. Also the social incentive to innovate under social planning is greater vis-a-vis the private incentive under monopoly.

Suggested Citation

  • Banerjee, Swapnendu, 2013. "Innovation Complementarity in a Vertically Differentiated Monopoly," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 48(2), pages 263-274.
    • Handle: RePEc:dse:indecr:0072
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    More about this item

    Keywords

    Process Innovation; Product Innovation; Complementarity; Continuous Consumer Types;
    All these keywords.

    JEL classification:

    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies

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