Persistence of Monopoly, Innovation, and R-and-D Spillovers: Static versus Dynamic Analysis

Kresimir Zigic (), Viatcheslav Vinogradov and Eugen Kovac
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Viatcheslav Vinogradov: CERGE-EI

No 516, Computing in Economics and Finance 2006 from Society for Computational Economics

Abstract: We build a dynamic duopoly model that accounts for the empirical observation of monopoly persistence in the long run. More specifically, we analyze the conditions under which it is optimal for the market leader in an initially duopoly setup to undertake pre-emptive R&D investment, ("strategic predation" strategy) that eventually leads to exit of the follower firm. The follower is assumed to benefit from the innovative activities of the leader through R&D spillovers. The novel feature of our approach is that we introduce explicit dynamic model and contrast it with its static counterpart. Contrary to the predictions of the static model, strategic predation that leads to persistence of monopoly is in general optimal strategy to pursue in a dynamic framework when spillovers are not large

Keywords: dynamic duopoly; R&D spillovers; persistence of monopoly; strategic predation; accommodation (search for similar items in EconPapers)
JEL-codes: L12 L13 L41 (search for similar items in EconPapers)
Date: 2006-07-04
New Economics Papers: this item is included in nep-com, nep-ino and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:sce:scecfa:516

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