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Process Innovation and Product Quality Improvement in a Dynamic Monopoly

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  • L. Lambertini
  • R. Orsini

Abstract

We investigate the optimal R&D portfolio of a single-product monopolist investing in cost-reducing activities accompanied by efforts improving the quality of its product. There emerges that the firm s relative incentives along the two directions are conditional upon market affluency, measured by consumers willingness to pay for quality, and R&D efforts are complements at equilibrium. We also perform the stability analysis, showing that a stable branch exists along the quality dimension only.

Suggested Citation

  • L. Lambertini & R. Orsini, 2014. "Process Innovation and Product Quality Improvement in a Dynamic Monopoly," Working Papers wp926, Dipartimento Scienze Economiche, Universita' di Bologna.
    • Handle: RePEc:bol:bodewp:wp926
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    References listed on IDEAS

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    1. Ping Lin, 2004. "Process and product R&D by a multiproduct monopolist," Oxford Economic Papers, Oxford University Press, vol. 56(4), pages 735-743, October.
    2. L. Colombo & L. Lambertini, 2003. "Dynamic Advertising Under Vertical Product Differentiation," Journal of Optimization Theory and Applications, Springer, vol. 119(2), pages 261-280, November.
    3. Luca Lambertini, 2003. "The monopolist's optimal R&D portfolio," Oxford Economic Papers, Oxford University Press, vol. 55(4), pages 561-578, October.
    4. Jesús Crespo Cuaresma & Tapio Palokangas & Alexander Tarasyev (ed.), 2013. "Green Growth and Sustainable Development," Dynamic Modeling and Econometrics in Economics and Finance, Springer, edition 127, number 978-3-642-34354-4, July-Dece.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    JEL classification:

    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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