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The Role of an Imitating Firm in a Dynamic Context

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  • Francisco Martínez-Sánchez

    (Lecturer Depto. de Teoría e Historia Económica, Universidad de Granada, Spain)

Abstract

We analyze the effects of an imitating firm on the behavior of the innovating firm. The framework of analysis used is a dynamic duopoly model of vertical product differentiation, where both the innovator and the imitator compete simultaneously in price and quality. We obtain that when the market is small, the presence of an imitator encourages the innovator to increase its innovating process, so the entry of the imitator should not be obstructed; and, when the market is large, the imitator reduces the innovator’s incentives to invest its economic resources in R&D and to provide a higher quality, so the entry of the imitator should not be encouraged.

Suggested Citation

  • Francisco Martínez-Sánchez, 2007. "The Role of an Imitating Firm in a Dynamic Context," Lecturas de Economía, Universidad de Antioquia, Departamento de Economía, issue 67, pages 225-240, Julio-Dic.
    • Handle: RePEc:lde:journl:y:2007:i:67:p:225-240
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    References listed on IDEAS

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    1. Paul Belleflamme & Cecilia Vergari, 2011. "Incentives To Innovate In Oligopolies," Manchester School, University of Manchester, vol. 79(1), pages 6-28, January.
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    More about this item

    Keywords

    Leader; Imitator; Quality; Differentiation of Product; Consumer;
    All these keywords.

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

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