Monopoly incentives to cost-reducing R&D
AbstractIt is here shown that there exist cost innovations for which a monopolist has a higher incentive to invest than a social planner. This unveils the limits of the claim, based on Arrow (1959), that a monopoly always has a lower incentive to innovate than a social planner and therefore than socially desirable. Contrary to previous results, the comparison of incentives may also depend upon the demand function. Finally, only under a restricted domain of analysis, a rule for comparing the monopoly and the social planner incentives is derived.
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Bibliographic InfoPaper provided by Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano in its series Departmental Working Papers with number 2010-06.
Date of creation: 08 Mar 2010
Date of revision: 27 Mar 2012
Monopoly; Research and Development; Innovation;
Other versions of this item:
- L00 - Industrial Organization - - General - - - General
- L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
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