Technological Progress in Races for Product Supremacy

Nguyen, Thang (2004): Technological Progress in Races for Product Supremacy.

Abstract

How does market structure affect quality innovation efforts and social welfare? This study considers three allocation mechanisms in a model of dynamic quality innovation: monopoly, duopoly, and the social planner. In this model, quality advances depend upon a stock of accumulated know-how, allowing for more flexible innovation strategies and direct comparisons of technology frontiers which show the largest reachable know-how stocks. When products are perfectly substitutable, the technology frontier is highest under the social planner, lower under duopoly, and lowest under monopoly. However, when products are less substitutable, a duopoly may surpass the technology frontier under the social planner along an unbalanced innovation path. Ex-ante and long-run social welfare are always highest under the social planner and lowest under monopoly.

• Item Type: MPRA Paper
• Language: English
• Keywords: R&D; quality innovation; product supremacy
• Subjects: O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O31 - Innovation and Invention: Processes and Incentives; D - Microeconomics > D2 - Production and Organizations > D21 - Firm Behavior: Theory; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L15 - Information and Product Quality ; Standardization and Compatibility; D - Microeconomics > D9 - Intertemporal Choice > D92 - Intertemporal Firm Choice, Investment, Capacity, and Financing; D - Microeconomics > D4 - Market Structure, Pricing, and Design > D43 - Oligopoly and Other Forms of Market Imperfection; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L13 - Oligopoly and Other Imperfect Markets

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