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Title:R&D incentives, compatibility and network externalities PDF Logo
Authors:Cerquera Dussán, Daniel
Issue Date:2006
Series/Report no.:ZEW Discussion Papers 06-93
Abstract:This paper analyzes the impact of network externalities on R&D competition between an incumbent and a potential entrant. The analysis shows that the incumbent always invests more than the entrant in the development of higher quality network goods. However, the incumbent exhibits a too low level of investments, while the entrant invests too much in R&D in comparison with the social optimum. In the model entry occurs too often in equilibrium. These inefficiencies are solely due to the presence of network externalities. By choosing compatible network goods, firms do not necessarily reduce the R&D competition intensity.
Subjects:Network externalities
Innovation
Imperfect Competition
JEL:L13
D85
D21
O31
Document Type:Working Paper
Appears in Collections:Publikationen von Forscherinnen und Forschern des ZEW
ZEW Discussion Papers

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