Process and product innovation by a multiproduct monopolist: A dynamic approach
We adopt a dynamic approach to model the behaviour of a multiproduct monopolist investing in process innovation, and either product differentiation, or product proliferation, or both. Irrespective of the number of activities appearing in the R&D portfolio, we prove that, depending on initial conditions, there may exists substitutability between process innovation and either form of product innovation along the optimal path towards the steady state, while in the latter only complementarity emerges. Looking at the threefold investment plan, we qualitatively characterise the ranking of R&D activities in terms of the consumer reservation price and the extent of the spectrum of varieties.
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.:
- Curtat, Laurent O., 1996. "Markov Equilibria of Stochastic Games with Complementarities," Games and Economic Behavior, Elsevier, vol. 17(2), pages 177-199, December.
- Sudipto Bhattacharya and Dilip Mookherhee., 1984.
"Portfolio Choice in Research and Development,"
Research Program in Finance Working Papers
147, University of California at Berkeley.
- Lambertini, Luca & Orsini, Raimondello, 2000.
"Process and product innovation in a vertically differentiated monopoly,"
Elsevier, vol. 68(3), pages 333-337, September.
- L. Lambertini & R. Orsini, 2000. "Process and Product Innovation in a Vertically Differentiated Monoply," Working Papers 367, Dipartimento Scienze Economiche, Universita' di Bologna.
- Vives, X., 1988.
"Nash Equilibrium With Strategic Complementarities,"
UFAE and IAE Working Papers
107-88, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
- Harrington Jr. , Joseph E., 1995. "Experimentation and Learning in a Differentiated-Products Duopoly," Journal of Economic Theory, Elsevier, vol. 66(1), pages 275-288, June.
- Amir, Rabah, 1996.
"Cournot Oligopoly and the Theory of Supermodular Games,"
Games and Economic Behavior,
Elsevier, vol. 15(2), pages 132-148, August.
- AMIR, Rabah, 1994. "Cournot Oligopoly and the Theory of Supermodular Games," CORE Discussion Papers 1994013, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Utterback, James M & Abernathy, William J, 1975. "A dynamic model of process and product innovation," Omega, Elsevier, vol. 3(6), pages 639-656, December.
- AMIRÂ , Rabah, 1995.
"Continuous Stochastic Games of Capital Accumulation with Convex Transition,"
CORE Discussion Papers
1995009, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Amir, Rabah, 1996. "Continuous Stochastic Games of Capital Accumulation with Convex Transitions," Games and Economic Behavior, Elsevier, vol. 15(2), pages 111-131, August.
- Susan Athey & Armin Schmutzler, 1995. "Product and Process Flexibility in an Innovative Environment," RAND Journal of Economics, The RAND Corporation, vol. 26(4), pages 557-574, Winter.
- Lin, Ping & Saggi, Kamal, 2002. "Product differentiation, process R&D, and the nature of market competition," European Economic Review, Elsevier, vol. 46(1), pages 201-211, January.
- Bonanno, Giacomo & Haworth, Barry, 1998. "Intensity of competition and the choice between product and process innovation," International Journal of Industrial Organization, Elsevier, vol. 16(4), pages 495-510, July.
- Milgrom, Paul & Roberts, John, 1990. "Rationalizability, Learning, and Equilibrium in Games with Strategic Complementarities," Econometrica, Econometric Society, vol. 58(6), pages 1255-77, November.
- Andrea Mantovani, 2006.
"Complementarity between product and process innovation in a monopoly setting,"
Economics of Innovation and New Technology,
Taylor & Francis Journals, vol. 15(3), pages 219-234.
- A. Mantovani, 2005. "Complementarity between Product and Process innovation in a Monopoly Setting," Working Papers 533, Dipartimento Scienze Economiche, Universita' di Bologna.
- L. Lambertini & S. Poddar & D. Sasaki, 1997.
"Standardization and the Stability of Collusion,"
298, Dipartimento Scienze Economiche, Universita' di Bologna.
- Luca Lambertini, 2004. "Process and product R&D by a multiproduct monopolist: a reply to Lin," Oxford Economic Papers, Oxford University Press, vol. 56(4), pages 745-749, October.
- Rosenkranz, Stephanie, 2003. "Simultaneous choice of process and product innovation when consumers have a preference for product variety," Journal of Economic Behavior & Organization, Elsevier, vol. 50(2), pages 183-201, February.
- Spence, Michael, 1976. "Product Differentiation and Welfare," American Economic Review, American Economic Association, vol. 66(2), pages 407-14, May.
- Cellini, Roberto & Lambertini, Luca, 2002. "A differential game approach to investment in product differentiation," Journal of Economic Dynamics and Control, Elsevier, vol. 27(1), pages 51-62, November.
- Dasgupta, Partha & Maskin, Eric, 1987. "The Simple Economics of Research Portfolios," Economic Journal, Royal Economic Society, vol. 97(387), pages 581-95, September.
- Nirvikar Singh & Xavier Vives, 1984. "Price and Quantity Competition in a Differentiated Duopoly," RAND Journal of Economics, The RAND Corporation, vol. 15(4), pages 546-554, Winter.
- Lambertini, Luca & Rossini, Gianpaolo, 1998. "Product homogeneity as a prisoner's dilemma in a duopoly with R&D," Economics Letters, Elsevier, vol. 58(3), pages 297-301, March.
- Ron Adner & Daniel Levinthal, 2001. "Demand Heterogeneity and Technology Evolution: Implications for Product and Process Innovation," Management Science, INFORMS, vol. 47(5), pages 611-628, May.
- Klepper, Steven, 1996. "Entry, Exit, Growth, and Innovation over the Product Life Cycle," American Economic Review, American Economic Association, vol. 86(3), pages 562-83, June.
- Doraszelski, Ulrich, 2004. "Innovations, improvements, and the optimal adoption of new technologies," Journal of Economic Dynamics and Control, Elsevier, vol. 28(7), pages 1461-1480, April.
When requesting a correction, please mention this item's handle: RePEc:eee:indorg:v:27:y:2009:i:4:p:508-518. 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: (Zhang, Lei)
If references are entirely missing, you can add them using this form.