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Competition and innovation: an experimental investigation

  • Donja Darai
  • Dario Sacco
  • Armin Schmutzler

    ()

The paper analyzes the effects of more intense competition on firms’ incentives to invest in process innovations. We carry out experiments based on two-stage games, where R&D investment choices are followed by product market competition. As predicted by theory, an increase in the number of firms from two to four reduces investments. However, a positive effect is observed for a switch from Cournot to Bertrand, even though theory predicts a negative effect in the four-player case.

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File URL: http://hdl.handle.net/10.1007/s10683-010-9250-8
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Article provided by Springer in its journal Experimental Economics.

Volume (Year): 13 (2010)
Issue (Month): 4 (December)
Pages: 439-460

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Handle: RePEc:kap:expeco:v:13:y:2010:i:4:p:439-460
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