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Technological leadership and persistence of monopoly under endogenous entry: Static versus dynamic analysis

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  • Kovác, Eugen
  • Vinogradov, Viatcheslav
  • Zigic, Kresimir

Abstract

We build a dynamic oligopoly model with endogenous entry in which a particular firm (leader) invests in an innovation process, facing the subsequent entry of other firms (followers). We identify conditions that make it optimal for the leader in the initial oligopoly situation to undertake pre-emptive R&D investment (strategic predation) eventually resulting in the elimination of all followers. Compared to a static model, the dynamic one provides new insights into the leader's intertemporal investment choice, its optimal decision making, and the dynamics of the market structure over time. We also contrast the leader's investment decisions with those of the social planner.

Suggested Citation

  • Kovác, Eugen & Vinogradov, Viatcheslav & Zigic, Kresimir, 2010. "Technological leadership and persistence of monopoly under endogenous entry: Static versus dynamic analysis," Journal of Economic Dynamics and Control, Elsevier, vol. 34(8), pages 1421-1441, August.
  • Handle: RePEc:eee:dyncon:v:34:y:2010:i:8:p:1421-1441
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    Cited by:

    1. Hinloopen, J. & Smrkolj, G. & Wagener, F.O.O., 2013. "In Defense of Trusts: R&D Cooperation in Global Perspective," CeNDEF Working Papers 13-05, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
    2. Hinloopen, Jeroen & Smrkolj, Grega & Wagener, Florian, 2013. "From mind to market: A global, dynamic analysis of R&D," Journal of Economic Dynamics and Control, Elsevier, vol. 37(12), pages 2729-2754.
    3. Etro, Federico, 2016. "Research in economics and industrial organization," Research in Economics, Elsevier, vol. 70(4), pages 511-517.
    4. Susumu Cato & Ryoko Oki, 2012. "Leaders and competitors," Journal of Economics, Springer, vol. 107(3), pages 239-255, November.
    5. Jeroen Hinloopen & Grega Smrkolj & Florian Wagener, 2016. "R&D Cooperatives and Market Collusion: A Global Dynamic Approach," Tinbergen Institute Discussion Papers 16-048/II, Tinbergen Institute.
    6. Kováč, Eugen & Žigić, Krešimir, 2016. "Persistence of monopoly, innovation, and R&D spillovers," Research in Economics, Elsevier, vol. 70(4), pages 714-734.
    7. Federico Etro, 2014. "Some thoughts on the Sutton approach," Journal of Economics, Springer, vol. 112(2), pages 99-113, June.

    More about this item

    Keywords

    Dynamic oligopoly Endogenous entry Persistence of monopoly Strategic predation Accommodation;

    JEL classification:

    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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