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Competition and Innovation: An Experimental Investigation


Sacco, Dario; Schmutzler, Armin (2008). Competition and Innovation: An Experimental Investigation. Working paper series / Socioeconomic Institute No. 807, University of Zurich.

Abstract

The paper analyzes the e?ects of more intense competition on ?rms’ incentives to invest in process innovations. We carry out experiments based on two-stage games, where R&D investment choices are followed by product market competition. As predicted by theory, an increase in the number of ?rms from two to four reduces investments. However, a positive e?ect is observed for a switch from Cournot to Bertrand, even though theory predicts a negative e?ect in the four-player case.

Abstract

The paper analyzes the e?ects of more intense competition on ?rms’ incentives to invest in process innovations. We carry out experiments based on two-stage games, where R&D investment choices are followed by product market competition. As predicted by theory, an increase in the number of ?rms from two to four reduces investments. However, a positive e?ect is observed for a switch from Cournot to Bertrand, even though theory predicts a negative e?ect in the four-player case.

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Additional indexing

Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Economics
Working Paper Series > Socioeconomic Institute (former)
Dewey Decimal Classification:330 Economics
JEL Classification:C92, L13, O31
Language:English
Date:May 2008
Deposited On:29 Nov 2011 22:47
Last Modified:21 Nov 2017 15:38
Series Name:Working paper series / Socioeconomic Institute
Official URL:http://www.econ.uzh.ch/wp.html

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