Process R&D in Monopoly under Demand Uncertainty

Luca Lambertini ()

Working Papers from Dipartimento Scienze Economiche, Universita' di Bologna

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 Arrowian interpretation of the first result and a Schumpeterian interpretation of the second are proposed.

Date: 2004
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Related works:
Journal Article: Process R&D in Monopoly under Demand Uncertainty (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:bol:bodewp:507

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