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Incentives for Process Innovation in a Collusive Duopoly

Christoph Engel ()

No 2007_6, Discussion Paper Series of the Max Planck Institute for Research on Collective Goods from Max Planck Institute for Research on Collective Goods

Abstract: Two suppliers of a homogenous good know that, in the second period, they will be able to collude. Gains from collusion are split according to the Nash bargaining solution. In the first period, either of them is able to invest into process innovation. Innovation changes the status quo pay-off, and thereby affects the distribution of the gains from collusion. The resulting innovation incentive is strictly smaller than in the competitive case.

Keywords: Duopoly; Collusion; Innovation Incentives (search for similar items in EconPapers)
JEL-codes: D43 K21 L13 O31 (search for similar items in EconPapers)
Pages: 13 pages
Date: 2007-05
New Economics Papers: this item is included in nep-bec, nep-com, nep-law and nep-mic
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