A framework for non-drastic innovation with product differentiation

Jeremy Jackson and Jason Smith ()
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Jason Smith: Utah State University

Economics Bulletin, 2015, vol. 35, issue 1, 259-269

Abstract: We model non-drastic technological innovation in a duopoly model with differentiated products. We derive profit functions for both firms which depend on only one variable, the technological gap. As our model derives product demands directly from agent utility we are able to fully describe the welfare effects of innovation. We show that the welfare improvements from innovation come not only as firms accrue higher profits, by charging consumers higher prices, but also as consumers enjoy higher quality products.

Keywords: non-drastic innovation; product differentiation (search for similar items in EconPapers)
JEL-codes: L2 O3 (search for similar items in EconPapers)
Date: 2015-03-11
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Citations: View citations in EconPapers (1)

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