Persistence of Monopoly and Research Specialization
AbstractWe examine the persistence of monopolies in markets with innovations when the outcome of research is uncertain. We show that for low success probabilities of research, the incumbent can seldom preempt the potential entrant. Then the efficiency effect outweighs the replacement effect. It is vice versa for high probabilities. Moreover, the incumbent specializes in “safe” research and the potential entrant in “risky” research. We also show that the probability of entry has an inverted U-shape in the success probability. Since even at the peak entry is rather unlikely, the persistence of the monopoly is high.
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Bibliographic InfoPaper 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 2009_11.
Date of creation: Apr 2009
Date of revision:
Persistence of Monopoly; Efficiency Effect; Replacement Effect; Stochastic Innovations;
Find related papers by JEL classification:
- L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
- O31 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-04-18 (All new papers)
- NEP-COM-2009-04-18 (Industrial Competition)
- NEP-IND-2009-04-18 (Industrial Organization)
- NEP-INO-2009-04-18 (Innovation)
- NEP-MIC-2009-04-18 (Microeconomics)
- NEP-TID-2009-04-18 (Technology & Industrial Dynamics)
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