Monopoly incentives for cost-reducing R&D

Paolo Garella

Economics Letters, 2012, vol. 117, issue 1, 21-24

Abstract: It is shown in this paper that there exist cost innovations for which a monopolist has a higher incentive to invest than a social planner. This unveils the limits of the claim, based on Arrow (1959), that a monopoly always has a lower incentive to innovate than a social planner and therefore than is socially desirable. In contrast to previous results, the comparison of incentives may also depend upon the demand function. Finally, for a restricted domain of analysis, a rule for comparing the monopoly and the social planner incentives is derived.

Keywords: Monopoly; Research and development; Innovation (search for similar items in EconPapers)
JEL-codes: L00 L10 (search for similar items in EconPapers)
Date: 2012
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:117:y:2012:i:1:p:21-24

DOI: 10.1016/j.econlet.2012.04.050

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