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| Title: | | Dynamic R&D incentives with network externalities  |
| Authors: | | Cerquera Dussán, Daniel |
| Issue Date: | | 2006 |
| Series/Report no.: | | ZEW Discussion Papers 06-94 |
| 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 overinvestment 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. |
| Subjects: | | Network externalities Innovation Imperfect Competition Dynamic Games |
| JEL: | | L13 C73 O31 D85 |
| Document Type: | | Working Paper |
| Appears in Collections: | | Publikationen von Forscherinnen und Forschern des ZEW ZEW Discussion Papers
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