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Quality Ladders, Competition and Endogenous Growth

  • Michele Boldrin
  • David K Levine

We examine a competitive theory in which new ideas are introduced only when diminishing returns to the use of existing ideas sets in. After an idea is introduced, the capital associated with that idea expands, and the price of the idea falls. Once the price falls far enough, it becomes profitable to introduce a new, costlier, idea. The resulting competitive theory is consistent with fixed costs of innovation, no more difficult than the existing theory of monopolistic innovation, and accounts for the same basic facts. However, there is evidence that innovation is driven by diminishing returns on existing ideas – a fact that the existing theory does not account for.

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Paper provided by David K. Levine in its series Levine's Working Paper Archive with number 661465000000000028.

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Date of creation: 23 Mar 2010
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Handle: RePEc:cla:levarc:661465000000000028
Contact details of provider: Web page: http://www.dklevine.com/

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  1. Nancy L. Rose & Paul L. Joskow, 1988. "The Diffusion of New Technologies: Evidence From the Electric Utility Industry," NBER Working Papers 2676, National Bureau of Economic Research, Inc.
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  4. Macdonald, G.M., 1988. "Competitive Diffusion," University of Chicago - Economics Research Center 88-10, Chicago - Economics Research Center.
  5. Alvin K. Klevorick & Richard C. Levin & Richard R. Nelson & Sidney G. Winter, 1993. "On the Sources and Significance of Interindustry Differences in Technological Opportunities," Cowles Foundation Discussion Papers 1052, Cowles Foundation for Research in Economics, Yale University.
  6. Helios Herrera & Enrique Schroth, 2003. "Profitable Innovation Without Patent Protection: The Case of Derivatives," FAME Research Paper Series rp76, International Center for Financial Asset Management and Engineering.
  7. Jovanovic, Boyan & Lach, Saul, 1988. "Entry, Exit, And Diffusion With Learning By Doing," Working Papers 88-16, C.V. Starr Center for Applied Economics, New York University.
  8. Michele Boldrin, 2003. "Rent Seeking and Innovation," Theory workshop papers 658612000000000063, UCLA Department of Economics.
  9. Michele Boldrin & David K Levine, 2000. "Perfectly Competitive Innovation," Levine's Working Paper Archive 1996, David K. Levine.
  10. Irwin, Douglas A & Klenow, Peter J, 1994. "Learning-by-Doing Spillovers in the Semiconductor Industry," Journal of Political Economy, University of Chicago Press, vol. 102(6), pages 1200-1227, December.
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  12. Boldrin, Michele & Levine, David K., 2002. "Factor Saving Innovation," Journal of Economic Theory, Elsevier, vol. 105(1), pages 18-41, July.
  13. Michele Boldrin & David K. Levine, 2009. "A Model of Discovery," American Economic Review, American Economic Association, vol. 99(2), pages 337-42, May.
  14. Michele Boldrin & David K. Levine, 2000. "Growth cycles and market crashes," Staff Report 279, Federal Reserve Bank of Minneapolis.
  15. Hirshleifer, Jack, 1971. "The Private and Social Value of Information and the Reward to Inventive Activity," American Economic Review, American Economic Association, vol. 61(4), pages 561-74, September.
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  17. Josh Lerner, 2002. "Patent Protection and Innovation Over 150 Years," NBER Working Papers 8977, National Bureau of Economic Research, Inc.
  18. repec:fth:simfra:95-08 is not listed on IDEAS
  19. Funk, Peter, 2008. "Entry and growth in a perfectly competitive vintage model," Journal of Economic Theory, Elsevier, vol. 138(1), pages 211-236, January.
  20. Boyan Jovanovic & Glenn MacDonald, 1993. "Competitive Diffusion," NBER Working Papers 4463, National Bureau of Economic Research, Inc.
  21. Serguey Braguinsky & Salavat Gabdrakhmanov & Atsushi Ohyama, 2007. "A Theory of Competitive Industry Dynamics With Innovation and Imitation," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 10(4), pages 729-760, October.
  22. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth Through Creative Destruction," Scholarly Articles 12490578, Harvard University Department of Economics.
  23. Michele Boldrin & David K Levine, 2008. "Against Intellectual Monopoly," Levine's Bibliography 122247000000002371, UCLA Department of Economics.
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