Dynamic R&D Incentives with Network Externalities


Cerquera, Daniel


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URL: http://ub-madoc.bib.uni-mannheim.de/1480
URN: urn:nbn:de:bsz:180-madoc-14807
Document Type: Working paper
Year of publication: 2006
Publication language: English
Institution: Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
MADOC publication series: Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Subject: 330 Economics
Classification: JEL: C73 O31 D85 L13 ,
Subject headings (SWD): Forschung und Entwicklung , Externer Effekt , Netzwerk , Innovation , Marktentwicklung
Keywords (English): Network externalities , Innovation , Imperfect Competition , Dynamic Games
Abstract: This paper studies the incentives to undertake uncertain R&D initiatives in a dynamic duopoly network industry. It is shown that network externalities positively affect the incentives to invest in R&D. In the model, competition resembles a preemption race and, therefore, market performance implies an over-investment in R&D in comparison with the social optimum. Moreover, network externalities have an important impact in the dynamic evolution of the industry. Although in the long-run a single firm dominates the market (i.e. wins the race), short-run competition is very fierce and concentrated on neck-and-neck technological configurations. This short-run competition is fiercer and longer, the higher the level of network externalities. Policy measures that increase technological diffusion (i.e. mandatory licensing), increase the level of competition and/or prolong the short-run competition have an important positive impact on consumer welfare and on firms’ R&D incentives.
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Das Dokument wird vom Publikationsserver der Universitätsbibliothek Mannheim bereitgestellt.




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Cerquera, Daniel (2006) Dynamic R&D Incentives with Network Externalities. Open Access [Working paper]
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