TY - JOUR
T1 - Strategic R&D and the innovation of products
T2 - understanding the role of time preferences and product differentiation
AU - Walter, Jason M.
AU - Peterson, Jeffrey M.
N1 - Publisher Copyright:
© 2016 Informa UK Limited, trading as Taylor & Francis Group.
PY - 2017/10/3
Y1 - 2017/10/3
N2 - We evaluate the effects of innovation on competition using an optimal control approach that incorporates firms' time preferences. Using a model where firm(s) innovates by investing in research and development to create a more appealing product for heterogeneous consumers, we examine conditions that maximize social welfare. When firm(s) choose discount rate regardless of market structure, a monopoly will develop more innovative products. However, we show that duopolies may increase innovation if competition alters firms' outlook. Finally, we identify firm incentives to behave myopically, which in the context of collusion may impede industry-wide innovation.
AB - We evaluate the effects of innovation on competition using an optimal control approach that incorporates firms' time preferences. Using a model where firm(s) innovates by investing in research and development to create a more appealing product for heterogeneous consumers, we examine conditions that maximize social welfare. When firm(s) choose discount rate regardless of market structure, a monopoly will develop more innovative products. However, we show that duopolies may increase innovation if competition alters firms' outlook. Finally, we identify firm incentives to behave myopically, which in the context of collusion may impede industry-wide innovation.
KW - Dynamic R&D
KW - firm outlook
KW - product appeal
UR - http://www.scopus.com/inward/record.url?scp=84994300361&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=84994300361&partnerID=8YFLogxK
U2 - 10.1080/10438599.2016.1249063
DO - 10.1080/10438599.2016.1249063
M3 - Article
AN - SCOPUS:84994300361
SN - 1043-8599
VL - 26
SP - 575
EP - 595
JO - Economics of Innovation and New Technology
JF - Economics of Innovation and New Technology
IS - 7
ER -
