Chapter 9 Product and Process Innovation in Differential Games with Managerial Firms

Roberto Cellini and Luca Lambertini

A chapter in The Economics of Innovation, 2008, pp 159-176 from Emerald Group Publishing Limited

Abstract: We take a differential game approach to study the optimal choices of managerial firms concerning efforts in product a process innovation. We find the Nash equilibria under the open-loop and closed-loop information structure, and we compare the steady state allocations with the corresponding equilibria of markets populated by standard profit-maximising firms. We find that the managerial incentive leads firm to underinvest in product differentiation and to overinvest in process innovation, as compared to standard profit-maximising firms.

Date: 2008
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Persistent link: https://EconPapers.repec.org/RePEc:eme:ceazzz:s0573-8555(08)00209-5

DOI: 10.1016/S0573-8555(08)00209-5

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