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Sequential Product Innovation and Industry Evolution

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  • Beath, John
  • Katsoulacos, Yannis
  • Ulph, David

Abstract

A certain sequence of innovations in a vertically differentiated good is considered. Two firms are engaged in a series of bidding games to acquire the (infinitely- lived) patents to these. Managerial diseconomies restrict firms to producing a single good which is chosen optimally from the set of patents owned by the firm. Product market equilibrium is Bertrand. Two theorems provide (1) a sufficient condition for the current leader to be overthrown (action-reaction) and (2) a necessary and sufficient condition for persistent dominance. An illustrative example shows that sequences satisfying these conditions can always be constructed. Copyright 1987 by Royal Economic Society.

Suggested Citation

  • Beath, John & Katsoulacos, Yannis & Ulph, David, 1987. "Sequential Product Innovation and Industry Evolution," Economic Journal, Royal Economic Society, vol. 97(388a), pages 32-43, Supplemen.
    • Handle: RePEc:ecj:econjl:v:97:y:1987:i:388a:p:32-43
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    Cited by:

    1. Luigi Filippini, 1999. "Leapfrogging in a Vertical Product Differentiation Model," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 6(2), pages 245-256.
    2. Bernstein, Fernando & Federgruen, Awi, 2004. "Comparative statics, strategic complements and substitutes in oligopolies," Journal of Mathematical Economics, Elsevier, vol. 40(6), pages 713-746, September.
    3. Luca Lambertini & Piero Tedeschi, 2007. "On the Social Desirability of Patents for Sequential Innovations in a Vertically Differentiated Market," Journal of Economics, Springer, vol. 90(2), pages 193-214, March.
    4. Koellinger, Philipp, 2008. "The relationship between technology, innovation, and firm performance--Empirical evidence from e-business in Europe," Research Policy, Elsevier, vol. 37(8), pages 1317-1328, September.
    5. Gruber, Harald, 2000. "The evolution of market structure in semiconductors: the role of product standards," Research Policy, Elsevier, vol. 29(6), pages 725-740, June.
    6. Prokop, Jacek & Regibeau, Pierre & Rockett, Katharine, 2010. "Minimum quality standards and novelty requirements in a one-short development race," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 4, pages 1-49.
    7. L. Lambertini & P. Tedeschi, 2003. "Sequential Entry in a Vertically Differentiated Duopoly," Working Papers 492, Dipartimento Scienze Economiche, Universita' di Bologna.
    8. Susan Athey & Armin Schmutzler, 1999. "Innovation and the Emergence of Market Dominance," Working papers 99-18, Massachusetts Institute of Technology (MIT), Department of Economics.
    9. Francisco Caballero Sanz & Amparo Urbano Salvador, 1991. "The analytical structure of sequential models of innovation and market evolution," Investigaciones Economicas, Fundación SEPI, vol. 15(3), pages 531-553, September.
    10. Jacob Seifert, 2015. "Welfare effects of compulsory licensing," Journal of Regulatory Economics, Springer, vol. 48(3), pages 317-350, December.
    11. Rosenkranz, Stephanie, 1997. "Quality improvements and the incentive to leapfrog," International Journal of Industrial Organization, Elsevier, vol. 15(2), pages 243-261, April.
    12. Naoto Jinji, 2003. "Strategic policy for product R&D with symmetric costs," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 36(4), pages 993-1006, November.
    13. Rosenkranz, Stephanie, 1995. "Innovation and cooperation under vertical product differentiation," International Journal of Industrial Organization, Elsevier, vol. 13(1), pages 1-22, March.
    14. Harald Gruber, 1990. "Product Innovation and Persistence of Leadership: Theory with Evidence from the Semiconductor Industry," STICERD - Economics of Industry Papers 02, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    15. Michael Kuhn, "undated". "Low Quality Leadership in Vertically Differentiated Duopoly," Discussion Papers 00/38, Department of Economics, University of York.
    16. L. Lambertini & P. Tedeschi, 2003. "Sequential Entry in a Vertically Differentiated Duopoly," Working Papers 492, Dipartimento Scienze Economiche, Universita' di Bologna.
    17. John Sutton, 1996. "Game Theoretical Models of Market Structure," STICERD - Economics of Industry Papers 15, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    18. Francisco Requena‐Silvente & James T. Walker, 2009. "The Survival Of Differentiated Products: An Application To The Uk Automobile Market, 1971–2002," Manchester School, University of Manchester, vol. 77(3), pages 288-316, June.
    19. Aikaterini KOKKINOU, 2010. "Economic growth, innovation and collaborative research and development activities," Management & Marketing, Economic Publishing House, vol. 5(1), Spring.
    20. L. Lambertini & C. Iori, 2000. "Joint Venture for Product Innovation and Cartel Stability under Vertical Differentiation," Working Papers 385, Dipartimento Scienze Economiche, Universita' di Bologna.
    21. Koellinger, Ph.D., 2008. "The Relationship between Technology, Innovation, and Firm Performance: Empirical Evidence on E-Business in Europe," ERIM Report Series Research in Management ERS-2008-031-ORG, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    22. L. Lambertini, 1995. "Product Innovation Under Vertical Differentiation and the Persistence of Monopoly," Working Papers 227, Dipartimento Scienze Economiche, Universita' di Bologna.
    23. Greenstein, Shane & Ramey, Garey, 1998. "Market structure, innovation and vertical product differentiation," International Journal of Industrial Organization, Elsevier, vol. 16(3), pages 285-311, May.
    24. Laurent Reynald-Alexandre, 2006. "Choice of new attributes in the 'Elimination by Aspects' duopoly," Working Papers halshs-00590311, HAL.
    25. Flavio Delbono & Luca Lambertini, 2022. "Innovation and the persistence of monopoly under diseconomies of scope or scale," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 49(4), pages 747-757, December.

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