lynx   »   [go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/cer/papers/wp316.html
   My bibliography  Save this paper

Persistence of Monopoly, Innovation, and R&D Spillovers: Static versus Dynamic Analysis

Author

Listed:
  • Eugen Kovac
  • Viatcheslav Vinogradov
  • Kresimir Zigic
Abstract
We build a dynamic duopoly model that accounts for the empirical observation of monopoly persistence in the long run. More specifically, we analyze the conditions under which it is optimal for the market leader in an initially duopoly setup to undertake pre-emptive R&D investment ("strategic preda- tion") that eventually leads to the exit of the follower firm. The follower is assumed to benefit from the innovative activities of the leader through R&D spillovers. The novel feature of our approach is that we introduce an explicit dynamic model and contrast it with its static counterpart. Contrary to the predictions of the static model, strategic predation that leads to the persis- tence of monopoly is in general the optimal strategy to pursue in a dynamic framework when spillovers are not large.

Suggested Citation

  • Eugen Kovac & Viatcheslav Vinogradov & Kresimir Zigic, 2007. "Persistence of Monopoly, Innovation, and R&D Spillovers: Static versus Dynamic Analysis," CERGE-EI Working Papers wp316, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    • Handle: RePEc:cer:papers:wp316
    as

    Download full text from publisher

    File URL: http://www.cerge-ei.cz/pdf/wp/Wp316.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Federico Etro, 2006. "Aggressive leaders," RAND Journal of Economics, RAND Corporation, vol. 37(1), pages 146-154, March.
    2. Cohen, Wesley M & Levinthal, Daniel A, 1989. "Innovation and Learning: The Two Faces of R&D," Economic Journal, Royal Economic Society, vol. 99(397), pages 569-596, September.
    3. Avinash Dixit, 1979. "A Model of Duopoly Suggesting a Theory of Entry Barriers," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 20-32, Spring.
    4. Federico Etro, 2004. "Innovation by leaders," Economic Journal, Royal Economic Society, vol. 114(495), pages 281-303, April.
    5. R. Schmalensee & R. Willig (ed.), 1989. "Handbook of Industrial Organization," Handbook of Industrial Organization, Elsevier, edition 1, volume 2, number 2.
    6. Carlin Wendy & Schaffer Mark & Seabright Paul, 2004. "A Minimum of Rivalry: Evidence from Transition Economies on the Importance of Competition for Innovation and Growth," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 3(1), pages 1-43, September.
    7. Bolton, Patrick & Scharfstein, David S, 1990. "A Theory of Predation Based on Agency Problems in Financial Contracting," American Economic Review, American Economic Association, vol. 80(1), pages 93-106, March.
    8. Gual, Jordi & Hellwig, Martin & Perrot, Anne & Polo, Michele & Rey, Patrick & Schmidt, Klaus M. & Stenbacka, Rune, 2005. "An Economic Approach to Article 82 - Report by the European Advisory Group on Competition Policy," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 82, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    9. Ordover, Janusz A. & Saloner, Garth, 1989. "Predation, monopolization, and antitrust," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 9, pages 537-596, Elsevier.
    10. McGee, John S, 1980. "Predatory Pricing Revisited," Journal of Law and Economics, University of Chicago Press, vol. 23(2), pages 289-330, October.
    11. Fershtman, Chaim & Kamien, Morton I, 1987. "Dynamic Duopolistic Competition with Sticky Prices," Econometrica, Econometric Society, vol. 55(5), pages 1151-1164, September.
    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. Kresimir Zigic & Viatcheslav Vinogradov & Eugen Kovac, 2006. "Persistence of Monopoly, Innovation, and R-and-D Spillovers: Static versus Dynamic Analysis," Computing in Economics and Finance 2006 516, Society for Computational Economics.
    2. Kováč, Eugen & Žigić, Krešimir, 2016. "Persistence of monopoly, innovation, and R&D spillovers," Research in Economics, Elsevier, vol. 70(4), pages 714-734.
    3. Kovác, Eugen & Vinogradov, Viatcheslav & Zigic, Kresimir, 2010. "Technological leadership and persistence of monopoly under endogenous entry: Static versus dynamic analysis," Journal of Economic Dynamics and Control, Elsevier, vol. 34(8), pages 1421-1441, August.
    4. Kresimir Zigic, 2011. "Strategic Interactions in Markets with Innovative Activity: The Cases of Strategic Trade Policy and Market Leadership," CERGE-EI Books, The Center for Economic Research and Graduate Education - Economics Institute, Prague, edition 1, number b06, May.
    5. Inés Macho‐Stadler & Noriaki Matsushima & Ryusuke Shinohara, 2021. "Organizational Structure and Technological Investment," Journal of Industrial Economics, Wiley Blackwell, vol. 69(4), pages 785-816, December.
    6. Fiona Scott Morton, 1996. "Entry and Predation: British Shipping Cartels 1879-1929," NBER Working Papers 5663, National Bureau of Economic Research, Inc.
    7. Luigi Brighi & Marcello D'Amato, 2018. "Private Information and the Commitment Value of Unobservable Investment," Department of Economics 0123, University of Modena and Reggio E., Faculty of Economics "Marco Biagi".
    8. Krešimir Žigić, 2012. "Stackelberg leadership with product differentiation and endogenous entry: some comparative static and limiting results," Journal of Economics, Springer, vol. 106(3), pages 221-232, July.
    9. Luigi Brighi & Marcello D'Amato, 2018. "Private Information and the Commitment Value of Unobservable Investment," Center for Economic Research (RECent) 135, University of Modena and Reggio E., Dept. of Economics "Marco Biagi".
    10. Paulo G. Correa & Ana M. Fernandes & Chris J. Uregian, 2010. "Technology Adoption and the Investment Climate: Firm-Level Evidence for Eastern Europe and Central Asia," The World Bank Economic Review, World Bank, vol. 24(1), pages 121-147, January.
    11. Benchekroun, Hassan & van Long, Ngo, 1998. "Efficiency inducing taxation for polluting oligopolists," Journal of Public Economics, Elsevier, vol. 70(2), pages 325-342, November.
    12. Michael Reksulak & William F. Shughart & Robert D. Tollison, 2008. "Innovation and the opportunity cost of monopoly," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 29(8), pages 619-627.
    13. Dennis W. Carlton & Michael Waldman, 2002. "The Strategic Use of Tying to Preserve and Create Market Power in Evolving Industries," RAND Journal of Economics, The RAND Corporation, vol. 33(2), pages 194-220, Summer.
    14. Zhiyong Liu & Yue Qiao, 2012. "Abuse of Market Dominance Under China’s 2007 Anti-monopoly Law: A Preliminary Assessment," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 41(1), pages 77-107, August.
    15. Angela C. Chao & Jen-yao Lee & Leonard F.S. Wang, 2017. "Stackelberg Competition, Innovation and Social Efficiency of Entry," Manchester School, University of Manchester, vol. 85(1), pages 1-12, January.
    16. Tomas J. Philipson & Richard A. Posner, 2009. "Antitrust in the Not-for-Profit Sector," Journal of Law and Economics, University of Chicago Press, vol. 52(1), pages 1-18, February.
    17. Henriques, Irene & Sadorsky, Perry, 2011. "The effect of oil price volatility on strategic investment," Energy Economics, Elsevier, vol. 33(1), pages 79-87, January.
    18. Allen N. Berger & Astrid A. Dick, 2007. "Entry into Banking Markets and the Early‐Mover Advantage," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(4), pages 775-807, June.
    19. E. Cefis & M. Ghita, 2008. "Post Merger Innovative Patterns in Small and Medium Firms," Working Papers 08-09, Utrecht School of Economics.
    20. Boyer, Marcel & Mahenc, Philippe & Moreaux, Michel, 1995. "Entry Blockading Locations," IDEI Working Papers 53, Institut d'Économie Industrielle (IDEI), Toulouse.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:cer:papers:wp316. 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: Lucie Vasiljevova (email available below). General contact details of provider: https://edirc.repec.org/data/eiacacz.html .

    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.
    Лучший частный хостинг