IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this article

Too much R&D? – vertical differentiation and monopolistic competition

Listed author(s):
  • Jan Kranich
Registered author(s):

Purpose - This paper aims to discuss whether product research and development (R&D) in developed economies tends to be too high compared with the socially desired level. Design/methodology/approach - In this context, a model of vertical and horizontal product differentiation within the Dixit-Stiglitz framework of monopolistic competition is set up. Firms compete in horizontal attributes of their products, and also in quality that can be controlled by R&D investments. Findings - The paper reveals that in monopolistic-competitive industries, R&D intensity is positively correlated with market concentration. Furthermore, welfare and policy analysis demonstrate an overinvestment in R&D with the result that vertical differentiation is too high and horizontal differentiation is too low. The only effective policy instrument in order to contain welfare losses is a price control of R&D services. Originality/value - Considering the extent of product R&D as well as the political efforts to promote public and private research, this paper scrutinizes its benefit incorporating income and employment effects. Thus, it goes beyond partial-analytical models of the existing industrial organization literature and provides a larger base of political analysis.

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.

File URL:
Download Restriction: Access to full text is restricted to subscribers

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.

Article provided by Emerald Group Publishing in its journal Journal of Economic Studies.

Volume (Year): 36 (2009)
Issue (Month): 6 (October)
Pages: 641-659

in new window

Handle: RePEc:eme:jespps:v:36:y:2009:i:6:p:641-659
Contact details of provider: Web page:

Order Information: Postal: Emerald Group Publishing, Howard House, Wagon Lane, Bingley, BD16 1WA, UK
Web: Email:

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:eme:jespps:v:36:y:2009:i:6:p:641-659. 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: (Virginia Chapman)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.