Durable Goods, Innovation and Network Externalities
AbstractWe develop a model of R&D competition between an incumbent and a potential entrant with network externalities and durable goods. We show that the threat of entry eliminates the commitment problem that an incumbent may face in its R&D decision due to the goods? durability. Moreover, a potential entrant over-invests in R&D and an established incumbent might exhibit higher, equal or lower R&D investments in comparison with the social optimum. In our model, the incumbent?s commitment problem and the efficiency of its R&D level are determined by the extent of the network externalities. --
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Bibliographic InfoPaper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 07-086.
Date of creation: 2007
Date of revision:
Network externalities; Durable Goods; Innovation; Imperfect Competition;
Find related papers by JEL classification:
- O31 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-03-08 (All new papers)
- NEP-COM-2008-03-08 (Industrial Competition)
- NEP-CSE-2008-03-08 (Economics of Strategic Management)
- NEP-INO-2008-03-08 (Innovation)
- NEP-IPR-2008-03-08 (Intellectual Property Rights)
- NEP-MIC-2008-03-08 (Microeconomics)
- NEP-NET-2008-03-08 (Network Economics)
- NEP-SOC-2008-03-08 (Social Norms & Social Capital)
- NEP-TID-2008-03-08 (Technology & Industrial Dynamics)
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