Process R&D in Monopoly under Demand Uncertainty

Luca Lambertini ()

Economics Bulletin, 2006, vol. 15, issue 14, 1-9

Abstract: I investigate R&D efforts for process innovation in a monopoly with uncertain demand. Two different models are proposed, where either (i) the reservation price is affected by an additive shock and the marginal production cost is increasing, or (ii) a multiplicative shock on the slope of demand combines with a flat marginal production cost. In either case, price-setting behaviour generates a larger R&D investment than quantity-setting behaviour. An Arrovian interpretation of the first result and a Schumpeterian interpretation of the second are proposed.

Keywords: innovation (search for similar items in EconPapers)
JEL-codes: L1 O3 (search for similar items in EconPapers)
Date: 2006-12-27
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Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Process R&D in Monopoly under Demand Uncertainty (2004)
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