Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/76171
Authors: 
Darai, Donja
Sacco, Dario
Schmutzler, Armin
Year of Publication: 
2009
Series/Report no.: 
Working Paper, Socioeconomic Institute, University of Zurich 0608
Abstract: 
The paper analyzes the effects of more intense competition on firms' incentives to invest in process innovations. We carry out experiments for two-stage games, where R&D investment choices are followed by product market competition. As predicted by theory, an increase in the number of firms from two to four reduces investments. However, a positive effect is observed for a switch from Cournot to Bertrand, even though theory predicts a negative effect in the four-player case. This result reflects overinvestment in the Bertrand case. The results arise both in treatments in which both stages are implemented and in treatments in which only one stage is implemented.
Subjects: 
R&D investment
intensity of competition
experiment
JEL: 
C92
L13
O31
Document Type: 
Working Paper

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