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Innovation and product market concentration: Schumpeter, Arrow and the inverted-U shape curve

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  • F. Delbono
  • L. Lambertini

Abstract

We investigate the relationship between market concentration and industry innovative effort within a familiar two-stage model of R&D race in which fi?rms compete la Cournot in the product market. With the help of numerical simulations, we show that such a setting is rich enough to generate Arrovian, Schumpeterian and inverted-U curves. We interpret these different patterns on the basis of the relative strength of the technological incentive and the strategic incentive.

Suggested Citation

  • F. Delbono & L. Lambertini, 2017. "Innovation and product market concentration: Schumpeter, Arrow and the inverted-U shape curve," Working Papers wp2006, Dipartimento Scienze Economiche, Universita' di Bologna.
    • Handle: RePEc:bol:bodewp:wp2006
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    References listed on IDEAS

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    1. Delbono, Flavio & Denicolo, Vincenzo, 1990. "R & D investment in a symmetric and homogeneous oligopol : Bertrand vs Cournot," International Journal of Industrial Organization, Elsevier, vol. 8(2), pages 297-313, June.
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    6. Reinganum, Jennifer F, 1984. "Practical Implications of Game Theoretic Models of R&D," American Economic Review, American Economic Association, vol. 74(2), pages 61-66, May.
    7. Gilbert, Richard J & Newberry, David M G, 1984. "Preemptive Patenting and the Persistence of Monopoly: Reply," American Economic Review, American Economic Association, vol. 74(1), pages 251-253, March.
    8. Ira Horowitz, 1963. "Research Inclinations of a Cournot Oligopolist," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 30(2), pages 128-130.
    9. Morton I. Kamien & Nancy L. Schwartz, 1976. "On the Degree of Rivalry for Maximum Innovative Activity," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 90(2), pages 245-260.
    10. Marion B. Stewart, 1983. "Noncooperative Oligopoly and Preemptive Innovation without Winner-Take-All," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 98(4), pages 681-694.
    11. Flavio Delbono & Vincenzo Denicolo, 1991. "Incentives to Innovate in a Cournot Oligopoly," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(3), pages 951-961.
    12. Tom Lee & Louis L. Wilde, 1980. "Market Structure and Innovation: A Reformulation," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 94(2), pages 429-436.
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    Cited by:

    1. Vincenzo Denicolò & Michele Polo, 2018. "The innovation theory of harm: an appraisal," IEFE Working Papers 103, IEFE, Center for Research on Energy and Environmental Economics and Policy, Universita' Bocconi, Milano, Italy.
    2. Sunday OTUYA, 2024. "Effect of Audit Market Concentration on Pricing and Audit Quality. Evidence from an Emerging Economy," CECCAR Business Review, Body of Expert and Licensed Accountants of Romania (CECCAR), vol. 5(5), pages 71-80, May.
    3. 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.

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    More about this item

    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

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