Competition and Innovation: An Experimental Investigation
AbstractThe paper analyzes the effects of competitive intensity on firms' incentives to invest in process innovations through an experiment based on two-stage games, where R&D investment choices are followed by product market competition. An increase in the intensity of competition is modeled as an increase in the number of Þrms or as a switch from Cournot to Bertrand. The theoretical prediction is that more intense competition is unfavorable to investments for both cases. In the experiment it turns out that the way of modeling the intensity of competition is essential. The theoretical prediction is confirmed for the number effects. On the other hand, the comparison of Cournot and Bertrand shows that more intense competition is beneÞcial for investments.
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Bibliographic InfoPaper provided by University of Zurich, Socioeconomic Institute in its series Working Papers with number 0714.
Length: 35 pages
Date of creation: Oct 2007
Date of revision:
R&D investment; intensity of competition; experiment;
Find related papers by JEL classification:
- C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- 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-2007-11-10 (All new papers)
- NEP-COM-2007-11-10 (Industrial Competition)
- NEP-CSE-2007-11-10 (Economics of Strategic Management)
- NEP-EXP-2007-11-10 (Experimental Economics)
- NEP-INO-2007-11-10 (Innovation)
- NEP-IPR-2007-11-10 (Intellectual Property Rights)
- NEP-MIC-2007-11-10 (Microeconomics)
- NEP-TID-2007-11-10 (Technology & Industrial Dynamics)
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