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Competition and innovation: an experimental investigation

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  • Donja Darai
  • Dario Sacco
  • Armin Schmutzler

    ()

Abstract

The paper analyzes the effects of more intense competition on firms’ incentives to invest in process innovations. We carry out experiments based on two-stage games, where R&D investment choices are followed by product market competition. As predicted by theory, an increase in the number of firms from two to four reduces investments. However, a positive effect is observed for a switch from Cournot to Bertrand, even though theory predicts a negative effect in the four-player case.

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Bibliographic Info

Article provided by Springer in its journal Experimental Economics.

Volume (Year): 13 (2010)
Issue (Month): 4 (December)
Pages: 439-460

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Handle: RePEc:kap:expeco:v:13:y:2010:i:4:p:439-460

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Web page: http://www.springerlink.com/link.asp?id=102888

Related research

Keywords: R&D investment; Intensity of competition; Experiment; C92; L13; O31;

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