IDEAS home Printed from https://ideas.repec.org/a/spr/epolin/v49y2022i4d10.1007_s40812-022-00214-4.html
   My bibliography  Save this article

Innovation and the persistence of monopoly under diseconomies of scope or scale

Author

Listed:
  • Flavio Delbono

    (University of Bologna)

  • Luca Lambertini

    (University of Bologna)

Abstract

We participate in the lasting debate about the persistence of monopolies under technological change, by examining two deterministic games modelling innovation auctions. We highlight some novel aspects within such debate. If product innovation is at stake, the joint effect of diseconomies of scope and product differentiation may allow the entrant to acquire the innovation and give rise to a duopoly. Process innovation is analysed in a model with increasing marginal production costs to show that the innovating monopolist always uses both technologies by virtue of Jensen’s inequality, and this is sufficient but not necessary to preserve its monopoly power.

Suggested Citation

  • Flavio Delbono & Luca Lambertini, 2022. "Innovation and the persistence of monopoly under diseconomies of scope or scale," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 49(4), pages 747-757, December.
  • Handle: RePEc:spr:epolin:v:49:y:2022:i:4:d:10.1007_s40812-022-00214-4
    DOI: 10.1007/s40812-022-00214-4
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s40812-022-00214-4
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.

    File URL: https://libkey.io/10.1007/s40812-022-00214-4?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Gilbert Richard J, 2006. "Competition and Innovation," Journal of Industrial Organization Education, De Gruyter, vol. 1(1), pages 1-23, December.
    2. Beath, John & Katsoulacos, Yannis & Ulph, David, 1987. "Sequential Product Innovation and Industry Evolution," Economic Journal, Royal Economic Society, vol. 97(388a), pages 32-43, Supplemen.
    3. Partha Dasgupta & Joseph Stiglitz, 1980. "Uncertainty, Industrial Structure, and the Speed of R&D," Bell Journal of Economics, The RAND Corporation, vol. 11(1), pages 1-28, Spring.
    4. Kenneth Arrow, 1962. "Economic Welfare and the Allocation of Resources for Invention," NBER Chapters, in: The Rate and Direction of Inventive Activity: Economic and Social Factors, pages 609-626, National Bureau of Economic Research, Inc.
    5. Tom Lee & Louis L. Wilde, 1980. "Market Structure and Innovation: A Reformulation," The Quarterly Journal of Economics, Oxford University Press, vol. 94(2), pages 429-436.
    6. Vickers, John S, 1986. "The Evolution of Market Structure When There Is a Sequence of Innovations," Journal of Industrial Economics, Wiley Blackwell, vol. 35(1), pages 1-12, September.
    7. Glenn C. Loury, 1979. "Market Structure and Innovation," The Quarterly Journal of Economics, Oxford University Press, vol. 93(3), pages 395-410.
    8. Gilbert, Richard J & Newbery, David M G, 1982. "Preemptive Patenting and the Persistence of Monopoly," American Economic Review, American Economic Association, vol. 72(3), pages 514-526, June.
    9. Reinganum, Jennifer F, 1983. "Uncertain Innovation and the Persistence of Monopoly," American Economic Review, American Economic Association, vol. 73(4), pages 741-748, September.
    10. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, December.
    11. Philippe Aghion & Ufuk Akcigit & Peter Howitt, 2015. "The Schumpeterian Growth Paradigm," Annual Review of Economics, Annual Reviews, vol. 7(1), pages 557-575, August.
    12. Flavio DelbonoBy & Luca Lambertini, 2022. "Innovation and product market concentration: Schumpeter, arrow, and the inverted U-shape curve [Lessons from schumpeterian growth theory]," Oxford Economic Papers, Oxford University Press, vol. 74(1), pages 297-311.
    13. 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.
    14. Beath, John & Katsoulacos, Yannis & Ulph, David, 1989. "Strategic R&D Policy," Economic Journal, Royal Economic Society, vol. 99(395), pages 74-83, Supplemen.
    15. Philippe Aghion & Ufuk Akcigit & Peter Howitt, 2015. "Lessons from Schumpeterian Growth Theory," American Economic Review, American Economic Association, vol. 105(5), pages 94-99, May.
    16. Richard Gilbert, 2006. "Looking for Mr. Schumpeter: Where Are We in the Competition-Innovation Debate?," NBER Chapters, in: Innovation Policy and the Economy, Volume 6, pages 159-215, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ping Lin & Tianle Zhang & Wen Zhou, 2020. "Vertical integration and disruptive cross‐market R&D," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 29(1), pages 51-73, January.
    2. Ronald Goettler & Brett Gordon, 2014. "Competition and product innovation in dynamic oligopoly," Quantitative Marketing and Economics (QME), Springer, vol. 12(1), pages 1-42, March.
    3. Philipp Weinschenk, 2009. "Persistence of Monopoly and Research Specialization," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2009_11, Max Planck Institute for Research on Collective Goods.
    4. Langinier, Corinne & Moschini, GianCarlo, 2002. "Economics of Patents: An Overview, The," Staff General Research Papers Archive 2061, Iowa State University, Department of Economics.
    5. Shastitko. Andrey (Шаститко, Андрей) & Komkova, Anastasia Andreevna (Комкова, Анастасия Андреевна) & Kurdin, Alexander (Курдин, Александр) & Shastitko, Anastasia (Шаститко, Анастасия), 2016. "Competition Policy and Incentives for Innovation [Конкурентная Политика И Стимулы К Инновационной Деятельности]," Working Papers 1447, Russian Presidential Academy of National Economy and Public Administration.
    6. Tishler, Asher & Milstein, Irena, 2009. "R&D wars and the effects of innovation on the success and survivability of firms in oligopoly markets," International Journal of Industrial Organization, Elsevier, vol. 27(4), pages 519-531, July.
    7. Michael Peneder & Martin Woerter, 2014. "Competition, R&D and innovation: testing the inverted-U in a simultaneous system," Journal of Evolutionary Economics, Springer, vol. 24(3), pages 653-687, July.
    8. Athanasopoulos, Thanos, 2015. "Incentives to Innovate, Compatibility and Welfare in Durable Goods Markets with Network Effects," Economic Research Papers 270229, University of Warwick - Department of Economics.
    9. Czarnitzki, Dirk & Kraft, Kornelius, 2004. "An empirical test of the asymmetric models on innovative activity: who invests more into R&D, the incumbent or the challenger?," Journal of Economic Behavior & Organization, Elsevier, vol. 54(2), pages 153-173, June.
    10. Isabelle Brocas, 2003. "Les enjeux de la réglementation de la recherche et développement," Revue d'économie politique, Dalloz, vol. 113(1), pages 125-148.
    11. Belleflamme,Paul & Peitz,Martin, 2015. "Industrial Organization," Cambridge Books, Cambridge University Press, number 9781107687899, October.
    12. Federico Etro, 2004. "Innovation by leaders," Economic Journal, Royal Economic Society, vol. 114(495), pages 281-303, April.
    13. Bertrand, Olivier & Zuniga, Pluvia, 2006. "R&D and M&A: Are cross-border M&A different? An investigation on OECD countries," International Journal of Industrial Organization, Elsevier, vol. 24(2), pages 401-423, March.
    14. Flavio DelbonoBy & Luca Lambertini, 2022. "Innovation and product market concentration: Schumpeter, arrow, and the inverted U-shape curve [Lessons from schumpeterian growth theory]," Oxford Economic Papers, Oxford University Press, vol. 74(1), pages 297-311.
    15. Bourreau, Marc & Jullien, Bruno, 2018. "Mergers, investments and demand expansion," Economics Letters, Elsevier, vol. 167(C), pages 136-141.
    16. Garella, Paolo G., 2012. "Monopoly incentives for cost-reducing R&D," Economics Letters, Elsevier, vol. 117(1), pages 21-24.
    17. Leibowicz, Benjamin D., 2018. "Welfare improvement windows for innovation policy," Research Policy, Elsevier, vol. 47(2), pages 390-398.
    18. S. Baranzoni & P. Bianchi & L. Lambertini, 2000. "Multiproduct Firms, Product Differentiation, and Market Structure," Working Papers 368, Dipartimento Scienze Economiche, Universita' di Bologna.
    19. Hashem, Nawar & Ugur, Mehmet, 2011. "Product-market competition, corporate governance and innovation: evidence on US-listed firms," MPRA Paper 37481, University Library of Munich, Germany, revised Feb 2012.
    20. Antonio Tesoriere, 2021. "Drastic innovation reduces firms’ incentives to create divisions," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 38(3), pages 971-994, October.

    More about this item

    Keywords

    Process innovation; Product innovation; Auction; Sleeping patent;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:epolin:v:49:y:2022:i:4:d:10.1007_s40812-022-00214-4. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.