Firm Size, Rivalry and the Extent of the Market in Endogenous Technological Change

Pietro Peretto

No 96-07, Working Papers from Duke University, Department of Economics

Abstract: Evidence shows that firms build their market position by accumulating knowledge protected by secrecy, patents and other appropriation devices. I explore the implications of this fact in a model economy where oligopolistic firms establish in-house R&D programs. In symmetric equilibrium, the number of firms determines concentration and firm size. These determine the scale and the efficiency of R&D operations and the rate of innovation. The number of firms, moreover, is endogenous and determined jointly with the rate of growth by the zero-profit condition. This property yields new results. For example, the scale effect of population size may be negative. The market allocation of resources is not Pareto optimal. I discuss the nature of this distortion.

JEL-codes: E10 L16 O31 O40 (search for similar items in EconPapers)
Date: 1996
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Citations: View citations in EconPapers (3)

Published in EUROPEAN ECONOMIC REVIEW, Vol. 43, 1999, pages 1747-1773

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Journal Article: Firm size, rivalry and the extent of the market in endogenous technological change (1999)
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