On the Relationship between Competition and Innovation in a Duopoly with a Single Innovator
This paper studies the incentive by a single firm in a differentiated goods duopoly to engage in cost-reducing innovations and how this incentive is affected by the level of competition in the product market. It is found that a firm's innovation effort has a U-shaped relationship with the level of competition. This result generally holds true for both the initially more efficient firm and the initially less efficient firm and in both the open loop model and the closed loop model. Consumers always benefit from innovations and fare the best when the initially more efficient firm is the innovator.
Volume (Year): 33 (2013)
Issue (Month): 4 ()
|Contact details of provider:|| |
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.:
- Yongmin Chen & Marius Schwartz, 2013.
"Product Innovation Incentives: Monopoly vs. Competition,"
Journal of Economics & Management Strategy,
Wiley Blackwell, vol. 22(3), pages 513-528, 09.
- Yongmin Chen and Marius Schwartz, 2009. "Product Innovation Incentives: Monopoly vs. Competition," Working Papers gueconwpa~09-09-02, Georgetown University, Department of Economics.
- Tang, Jianmin, 2006. "Competition and innovation behaviour," Research Policy, Elsevier, vol. 35(1), pages 68-82, February.
- Demsetz, Harold, 1969. "Information and Efficiency: Another Viewpoint," Journal of Law and Economics, University of Chicago Press, vol. 12(1), pages 1-22, April.
- Avinash Dixit, 1979. "A Model of Duopoly Suggesting a Theory of Entry Barriers," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 20-32, Spring.
- Dixit, Avinash K., 1978. "A Model of Duopoly Suggesting a Theory of Entry Barriers," The Warwick Economics Research Paper Series (TWERPS) 125, University of Warwick, Department of Economics.
- Yi, Sang-Seung, 1999. "Market structure and incentives to innovate: the case of Cournot oligopoly," Economics Letters, Elsevier, vol. 65(3), pages 379-388, December.
- Gilbert, Richard J & Newbery, David M G, 1982. "Preemptive Patenting and the Persistence of Monopoly," American Economic Review, American Economic Association, vol. 72(3), pages 514-526, June.
- Sacco, Dario & Schmutzler, Armin, 2011. "Is there a U-shaped relation between competition and investment?," International Journal of Industrial Organization, Elsevier, vol. 29(1), pages 65-73, January. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:ebl:ecbull:eb-13-00366. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (John P. Conley)
If references are entirely missing, you can add them using this form.