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Stochastic Innovation and Product Market Organization

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Author Info

  • Reynolds, Stanley S
  • Isaac, R Mark

Abstract

This paper analyzes how different types of product market organization affect firms' R&D investments in a stochastic innovation framework. Product market competition determines payoffs to successful and unsuccessful firms. Restrictions on the research project success probability distribution are identified that yield an invariance result for expenditure per R&D project. The impact of the number of firms (n) on the amount of market R&D is shown to be sensitive to product market organization. For a major process innovation, firms undertake more R&D projects under Cournot product market competition than under Bertrand competition, for "n" sufficiently large. A numerical example is used to illustrate welfare tradeoffs.

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Bibliographic Info

Article provided by Springer in its journal Economic Theory.

Volume (Year): 2 (1992)
Issue (Month): 4 (October)
Pages: 525-45

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Handle: RePEc:spr:joecth:v:2:y:1992:i:4:p:525-45

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Web page: http://link.springer.de/link/service/journals/00199/index.htm

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Cited by:
  1. Igor Letina, 2013. "The road not taken: competition and the R&D portfolio," ECON - Working Papers 127, Department of Economics - University of Zurich.
  2. Klaus Abbink & Jordi Brandts, 2005. "Collusion in Growing and Shrinking Markets: Empirical Evidence from Experimental Duopolies," Discussion Papers 2005-03, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
  3. Letina, Igor, 2013. "The road not taken: competition and the R&D portfolio," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79871, Verein für Socialpolitik / German Economic Association.
  4. Suetens, S., 2004. "Literature review: R&D cooperation in oligopoly with spillovers: An experimental economics approach," Open Access publications from Tilburg University urn:nbn:nl:ui:12-3529827, Tilburg University.

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