This paper analyzes the impact of R&D subsidies on incumbent firms to introduce new goods. We are especially interested in investigating various consequences of government subsidies for R&D, provided to firms that o.er products of di.erent qualities. This study examines the incentives of incumbent firms to introduce new products of various quality, their prices, as well as the product variety o.ered on the market. We find that the innovator always introduces a new product of higher quality and withdraws the existing product from the market. Providing an R&D subsidy to a high-quality firm results in a new product with higher quality than an R&D subsidy provided to a low-quality firm, at the expense of all consumers paying higher prices for all goods in the market. When the R&D subsidy is small, the low quality firm may not introduce a new product into the market, given that R&D costs for quality improvement are high and the degree of product differentiation is small.
ZUSAMMENFASSUNG - (Neue Produkteinführung etablierter Unternehmen) In dieser Studie untersuchen wir die Anreize etablierter Unternehmen, neue Produkte mit unterschiedlicher Qualität in den Markt einzuführen. Wir betrachten ein Duopol, in dem jedes Unternehmen ein Produkt mit unterschiedlicher Qualität anbietet und nehmen an, daß ein technologischer Fortschritt die Produktionstechnologie eines Unternehmens (der potentielle Innovator) beeinflußt, um ein neues Produkt in den Markt einzuführen. Der Innovator hat die Möglichkeit das alte Produkt vom Markt abzuziehen. Wir zeigen, daß die Entscheidung, ein neues Produkt in den Markt einzuführen, von den Produktionskosten für Qualität, und den vorigen Produktqualitäten abhängt. Der Innovator führt ein neues Produkt mit höherer Qualität ein und zieht das alte Produkt aus dem Markt,um einen höheren Preiswettbewerb und einen Nachfrageverdrängungseffekt zu vermeiden. Folglich werden nur zwei Produkte im Markt angeboten.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG) in its series CIG Working Papers with number
FS IV 99-19.
Find related papers by JEL classification: L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods O31 - Economic Development, Technological Change, and Growth - - Technological Change - - - Innovation and Invention: Processes and Incentives O32 - Economic Development, Technological Change, and Growth - - Technological Change - - - Management of Technological Innovation and R&D O38 - Economic Development, Technological Change, and Growth - - Technological Change - - - Government Policy
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Kenneth L. Judd, 1983.
"Credible Spatial Preemption,"
Discussion Papers
577, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
[Downloadable!]