On the timing of innovation and imitation

Etienne Billette de Villemeur, Richard Ruble and Bruno Versaevel

MPRA Paper from University Library of Munich, Germany

Abstract: When fixed costs of innovation and imitation differ, strategic competition between duopolists involves either preemption or attrition, the latter being likelier with high uncertainty. We show that industry value is maximized when firms neither stall nor hasten entry, whereas social welfare has local optima in both the attrition and preemption ranges. The social optimum implies a positive imitation cost, and with static business-stealing and sufficient discounting it involves preemption. Finally we endogenize entry barriers and discuss contracting, showing that firms are more likely to rely on secrecy and patents at low imitation costs and that simple licensing schemes are welfare improving.

Keywords: Dynamic oligopoly; Knowledge spillover; Real options (search for similar items in EconPapers)
JEL-codes: G31 L13 O33 (search for similar items in EconPapers)
Date: 2015-12-18
New Economics Papers: this item is included in nep-bec, nep-com and nep-ino
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:69161

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