Persistence of Monopoly and Research Specialization

Philipp Weinschenk ()
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Philipp Weinschenk: Max Planck Institute for Research on Collective Goods

No 2009_11, Discussion Paper Series of the Max Planck Institute for Research on Collective Goods from Max Planck Institute for Research on Collective Goods

Abstract: We examine the persistence of monopolies in markets with innovations when the outcome of research is uncertain. We show that for low success probabilities of research, the incumbent can seldom preempt the potential entrant. Then the efficiency effect outweighs the replacement effect. It is vice versa for high probabilities. Moreover, the incumbent specializes in “safe” research and the potential entrant in “risky” research. We also show that the probability of entry has an inverted U-shape in the success probability. Since even at the peak entry is rather unlikely, the persistence of the monopoly is high.

Keywords: Persistence of Monopoly; Efficiency Effect; Replacement Effect; Stochastic Innovations (search for similar items in EconPapers)
JEL-codes: L12 O31 (search for similar items in EconPapers)
Date: 2009-04
New Economics Papers: this item is included in nep-com, nep-ind, nep-ino, nep-mic and nep-tid
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:mpg:wpaper:2009_11

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