Competition and Innovation: An Experimental Investigation

Dario Sacco ()
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Dario Sacco: Socioeconomic Institute, University of Zurich

No 714, SOI - Working Papers from Socioeconomic Institute - University of Zurich

Abstract: The paper analyzes the effects of competitive intensity on firms' incentives to invest in process innovations through an experiment based on two-stage games, where R&D investment choices are followed by product market competition. An increase in the intensity of competition is modeled as an increase in the number of �rms or as a switch from Cournot to Bertrand. The theoretical prediction is that more intense competition is unfavorable to investments for both cases. In the experiment it turns out that the way of modeling the intensity of competition is essential. The theoretical prediction is confirmed for the number effects. On the other hand, the comparison of Cournot and Bertrand shows that more intense competition is bene�cial for investments.

Keywords: R&D investment; intensity of competition; experiment (search for similar items in EconPapers)
JEL-codes: C92 L13 O31 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2007-10
New Economics Papers: this item is included in nep-com, nep-cse, nep-exp, nep-ino, nep-ipr, nep-pr~, nep-mic and nep-tid
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https://www.zora.uzh.ch/id/eprint/52384/1/wp0714.pdf First version, 2007 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:soz:wpaper:0714

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