Process R&D in Monopoly under Demand Uncertainty
AbstractI investigate R&D efforts for process innovation in a monopoly with uncertain demand. Two different models are proposed, where either (i) the reservation price is affected by an additive shock and the marginal production cost is increasing, or (ii) a multiplicative shock on the slope of demand combines with a flat marginal production cost. In either case, price-setting behaviour generates a larger R&D investment than quantity-setting behaviour. An Arrovian interpretation of the first result and a Schumpeterian interpretation of the second are proposed.
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Bibliographic InfoPaper provided by Dipartimento Scienze Economiche, Universita' di Bologna in its series Working Papers with number 507.
Date of creation: 2004
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- O3 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights
- L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
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- M. L. Weitzman, 1973.
"Prices vs. Quantities,"
Working papers, Massachusetts Institute of Technology (MIT), Department of Economics
106, Massachusetts Institute of Technology (MIT), Department of Economics.
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- Paul Klemperer & Margaret Meyer, 1986. "Price Competition vs. Quantity Competition: The Role of Uncertainty," RAND Journal of Economics, The RAND Corporation, vol. 17(4), pages 618-638, Winter.
- Reinganum, Jennifer F., 1989. "The timing of innovation: Research, development, and diffusion," Handbook of Industrial Organization, Elsevier, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 14, pages 849-908 Elsevier.
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