Process and product innovation by a multiproduct monopolist: A dynamic approach

Luca Lambertini and Andrea Mantovani

International Journal of Industrial Organization, 2009, vol. 27, issue 4, pages 508-518

Abstract: We adopt a dynamic approach to model the behaviour of a multiproduct monopolist investing in process innovation, and either product differentiation, or product proliferation, or both. Irrespective of the number of activities appearing in the R&D portfolio, we prove that, depending on initial conditions, there may exists substitutability between process innovation and either form of product innovation along the optimal path towards the steady state, while in the latter only complementarity emerges. Looking at the threefold investment plan, we qualitatively characterise the ranking of R&D activities in terms of the consumer reservation price and the extent of the spectrum of varieties.

Keywords: Product; innovation; Process; innovation; Complementarity (search for similar items in EconPapers)
Date: 2009

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Persistent link: http://EconPapers.repec.org/RePEc:eee:indorg:v:27:y:2009:i:4:p:508-518

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