EconPapers    
Economics at your fingertips  
 

Can a larger market foster R&D under monopolistic competition with variable mark-ups?

Igor Bykadorov () and Sergey Kokovin

Research in Economics, 2017, vol. 71, issue 4, 663-674

Abstract: We study monopolistic competition with symmetric directly additive preferences (generating variable mark-ups) and an endogenous technology choice. Each firm chooses an investment in R&D to decrease its marginal cost. We prove that the equilibrium R&D investment increases with market size (a larger population or trade) only if the price-elasticity of demand is an increasing function. Together with the output levels, such equilibrium investments may be socially excessive or insufficient, depending on whether the elasticity of the subutility is increasing or decreasing. The main implication is that opening up to free trade can foster R&D through variable mark-ups.

Keywords: R&D investments; Trade and efficiency; Monopolistic competition; Variable mark-ups; Trade gains (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1090944317302806
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:reecon:v:71:y:2017:i:4:p:663-674

Access Statistics for this article

Research in Economics is currently edited by Federico Etro

More articles in Research in Economics from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

 
Page updated 2019-05-31
Handle: RePEc:eee:reecon:v:71:y:2017:i:4:p:663-674