Monopoly incentives to cost-reducing R&D

Paolo Garella

Departmental Working Papers from Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano

Abstract: It is here shown 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 socially desirable. Contrary to previous results, the comparison of incentives may also depend upon the demand function. Finally, only under 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: 2010-03-08, Revised 2012-03-27
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Journal Article: Monopoly incentives for cost-reducing R&D (2012)
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