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The Monopolist's Optimal R&D Portfolio

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  • L. Lambertini

Abstract

The monopolist's incentives towards product and process innovations are evaluated against the social optimum. The main findings are that (i) the incentive to invest in cost-reducing R&D is inversely related to the number of varieties being supplied at equilibrium, under both regimes; (ii) distortions obtain under monopoly, w.r.t. both the number of varieties and the technology. With substitutes, the monopolist's product range is smaller than under social planning, while with complements the product range is the same under both regimes. For any given number of goods, the monopolist operates at a higher marginal cost than the planner does. Copyright 2003, Oxford University Press.

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Paper provided by Dipartimento Scienze Economiche, Universita' di Bologna in its series Working Papers with number 391.

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Date of creation: 2000
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Handle: RePEc:bol:bodewp:391

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  1. Rosenkranz, Stephanie, 1996. "Simultaneous Choice of Process and Product Innovation," CEPR Discussion Papers 1321, C.E.P.R. Discussion Papers.
  2. Panzar, John C., 1989. "Technological determinants of firm and industry structure," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 1, pages 3-59 Elsevier.
  3. Brander, James A & Eaton, Jonathan, 1984. "Product Line Rivalry," American Economic Review, American Economic Association, vol. 74(3), pages 323-34, June.
  4. GABSZEWICZ, Jean J. & SHAKED, Avner & SUTTON, John & THISSE, Jacques-François, . "Segmenting the market: the monopolist's optimal product mix," CORE Discussion Papers RP -707, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  5. Simon P. Anderston & Andre de Palma, 1991. "Multiproduct Firms: A Nested Logit Approach," Discussion Papers 973, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  6. L. Lambertini & R. Orsini, 2000. "Process and Product Innovation in a Vertically Differentiated Monoply," Working Papers 367, Dipartimento Scienze Economiche, Universita' di Bologna.
  7. Champsaur, Paul & Rochet, Jean-Charles, 1989. "Multiproduct Duopolists," Econometrica, Econometric Society, vol. 57(3), pages 533-57, May.
  8. Klemperer, P., 1992. "Competition when Consumers Have Switching Costs: An Overview," Economics Series Working Papers 99142, University of Oxford, Department of Economics.
  9. Avinash Dixit, 1979. "A Model of Duopoly Suggesting a Theory of Entry Barriers," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 20-32, Spring.
  10. MacDonald, Glenn M & Slivinski, Alan, 1987. "The Simple Analytics of Competitive Equilibrium with Multiproduct Firms," American Economic Review, American Economic Association, vol. 77(5), pages 941-53, December.
  11. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
  12. Bonanno, Giacomo, 1987. "Location Choice, Product Proliferation and Entry Deterrence," Review of Economic Studies, Wiley Blackwell, vol. 54(1), pages 37-45, January.
  13. Paul Klemperer & A. Jorge Padilla, 1997. "Do Firms' Product Lines Include Too Many Varieties?," RAND Journal of Economics, The RAND Corporation, vol. 28(3), pages 472-488, Autumn.
  14. Klemperer, Paul, 1992. "Equilibrium Product Lines: Competing Head-to-Head May Be Less Competitive," American Economic Review, American Economic Association, vol. 82(4), pages 740-55, September.
  15. De Fraja, Giovanni, 1994. "A General Characterization of Multiproduct Cournot Competition," Bulletin of Economic Research, Wiley Blackwell, vol. 46(2), pages 171-83, April.
  16. Wernerfelt, Birger, 1986. "Product Line Rivalry: Note," American Economic Review, American Economic Association, vol. 76(4), pages 842-44, September.
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Cited by:
  1. Andrea Mantovani, 2006. "Complementarity between product and process innovation in a monopoly setting," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 15(3), pages 219-234.
  2. L. Lambertini & R. Orsini, 2014. "Process Innovation and Product Quality Improvement in a Dynamic Monopoly," Working Papers wp926, Dipartimento Scienze Economiche, Universita' di Bologna.
  3. Saha, Souresh, 2014. "Firm's objective function and product and process R&D," Economic Modelling, Elsevier, vol. 36(C), pages 484-494.

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