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Incentives for Process Innovation in a Collusive Duopoly

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Author Info
Christoph Engel () (Max Planck Institute for Research on Collective Goods, Bonn)

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Abstract

Two suppliers of a homogenous good know that, in the second period, they will be able to collude. Gains from collusion are split according to the Nash bargaining solution. In the first period, either of them is able to invest into process innovation. Innovation changes the status quo pay-off, and thereby affects the distribution of the gains from collusion. The resulting innovation incentive is strictly smaller than in the competitive case.

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Publisher Info
Paper provided by Max Planck Institute for Research on Collective Goods in its series Working Paper Series of the Max Planck Institute for Research on Collective Goods with number 2007_6.

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Length: 13 pages
Date of creation: May 2007
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Handle: RePEc:mpg:wpaper:2007_6

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Related research
Keywords: Duopoly Collusion Innovation Incentives

Find related papers by JEL classification:
D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
O31 - Economic Development, Technological Change, and Growth - - Technological Change - - - Innovation and Invention: Processes and Incentives

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This page was last updated on 2008-8-12.

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