Is there a U-shaped relation between competition and investment?
We consider a two-stage game with cost-reducing investments followed by a linear differentiated Cournot duopoly. With competition inversely parameterized by the extent of product differentiation, investment in the subgame perfect equilibrium is typically minimal for intermediate levels of competition. Laboratory experiments partly confirm the U-shape in a reduced one-stage version of the game. In the two-stage version, there is no evidence for positive effects of moving from intermediate to intense competition.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
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.:
- Gilbert, Richard J, 2007.
"Competition and Innovation,"
Competition Policy Center, Working Paper Series
qt9xh5p5p9, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
- Philippe Aghion & Nick Bloom & Richard Blundell & Rachel Griffith & Peter Howitt, 2005.
"Competition and Innovation: an Inverted-U Relationship,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 120(2), pages 701-728.
- Philippe Aghion & Nicholas Bloom & Richard Blundell & Rachel Griffith & Peter Howitt, 2002. "Competition and innovation: an inverted U relationship," IFS Working Papers W02/04, Institute for Fiscal Studies.
- Howitt, Peter & Griffith, Rachel & Aghion, Philippe & Blundell, Richard & Bloom, Nick, 2005. "Competition and Innovation: An Inverted-U Relationship," Scholarly Articles 4481507, Harvard University Department of Economics.
- Philippe Aghion & Nicholas Bloom & Richard Blundell & Rachel Griffith & Peter Howitt, 2002. "Competition and Innovation: An Inverted U Relationship," NBER Working Papers 9269, National Bureau of Economic Research, Inc.
- Jörg Oechssler & Frank Schuhmacher, 2001.
"The Limited Liability Effect in Experimental Duopoly Markets,"
Bonn Econ Discussion Papers
bgse36_2001, University of Bonn, Germany.
- Oechssler, Jorg & Schuhmacher, Frank, 2004. "The limited liability effect in experimental duopoly markets," International Journal of Industrial Organization, Elsevier, vol. 22(2), pages 163-184, February.
- Daniel Halbheer & Ernst Fehr & Lorenz Goette & Armin Schmutzler, 2007.
"Self-Reinforcing Market Dominance,"
SOI - Working Papers
0711, Socioeconomic Institute - University of Zurich.
- James A. Brander & Barbara J. Spencer, 1984.
"Export Subsidies and International Market Share Rivalry,"
NBER Working Papers
1464, National Bureau of Economic Research, Inc.
- Brander, James A. & Spencer, Barbara J., 1985. "Export subsidies and international market share rivalry," Journal of International Economics, Elsevier, vol. 18(1-2), pages 83-100, February.
- Donja Darai & Dario Sacco & Armin Schmutzler, 2010.
"Competition and innovation: an experimental investigation,"
Springer;Economic Science Association, vol. 13(4), pages 439-460, December.
- Donja Darai & Dario Sacco & Armin Schmutzler, 2009. "Competition and Innovation: An Experimental Investigation," SOI - Working Papers 0608, Socioeconomic Institute - University of Zurich, revised Apr 2007.
- Dario Sacco & Armin Schmutzler, 2008. "Competition and Innovation: An Experimental Investigation," SOI - Working Papers 0807, Socioeconomic Institute - University of Zurich.
- Steffen Huck & Hans-Theo Normann & Jörg Oechssler, 2001.
"Two are Few and Four are Many: Number Effects in Experimental Oligopolies,"
Bonn Econ Discussion Papers
bgse12_2001, University of Bonn, Germany.
- Huck, Steffen & Normann, Hans-Theo & Oechssler, Jorg, 2004. "Two are few and four are many: number effects in experimental oligopolies," Journal of Economic Behavior & Organization, Elsevier, vol. 53(4), pages 435-446, April.
- Fershtman, Chaim & Judd, Kenneth L, 1987.
"Equilibrium Incentives in Oligopoly,"
American Economic Review,
American Economic Association, vol. 77(5), pages 927-40, December.
- Huck, Steffen & Müller, Wieland & Normann, Hans-Theo, 2000.
"Strategic delegation in experimental markets,"
SFB 373 Discussion Papers
2000,39, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
- Steffen Huck & Wieland Müller & Hans-Theo Norman, 2000. "Strategic Delegation in Experimental Markets," CESifo Working Paper Series 290, CESifo Group Munich.
- Huck, S. & Müller, W. & Normann, H.T., 2004. "Strategic delegation in experimental markets," Other publications TiSEM 64e031eb-d6bb-4b12-8b1e-1, Tilburg University, School of Economics and Management.
- Mason, Charles F & Phillips, Owen R & Nowell, Clifford, 1992. "Duopoly Behavior in Asymmetric Markets: An Experimental Evaluation," The Review of Economics and Statistics, MIT Press, vol. 74(4), pages 662-70, November.
- Isaac, R. Mark & Reynolds, Stanley S., 1992. "Schumpeterian competition in experimental markets," Journal of Economic Behavior & Organization, Elsevier, vol. 17(1), pages 59-100, January.
- Charles F. Mason & Owen R. Phillips, 1997. "Information And Cost Asymmetry In Experimental Duopoly Markets," The Review of Economics and Statistics, MIT Press, vol. 79(2), pages 290-299, May.
- Armin Schmutzler, 2007. "The relation between competition and innovation ï¿½ Why is it such a mess?," SOI - Working Papers 0716, Socioeconomic Institute - University of Zurich, revised Jan 2010.
- R. Mark Isaac & Stanley S. Reynolds, 1988. "Appropriability and Market Structure in a Stochastic Invention Model," The Quarterly Journal of Economics, Oxford University Press, vol. 103(4), pages 647-671.
- Athey, Susan & Schmutzler, Armin, 2001. "Investment and Market Dominance," RAND Journal of Economics, The RAND Corporation, vol. 32(1), pages 1-26, Spring.
- Dirk Engelmann & Hans-Theo Normann, 2003.
"An Experimental Test of Strategic Trade Policy,"
CERGE-EI Working Papers
wp212, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
When requesting a correction, please mention this item's handle: RePEc:eee:indorg:v:29:y:2011:i:1:p:65-73. 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: (Shamier, Wendy)
If references are entirely missing, you can add them using this form.