Durable Goods, Innovation and Network Externalities

Daniel Cerquera Dussán

No 07-086, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: We develop a model of R&D competition between an incumbent and a potential entrant with network externalities and durable goods. We show that the threat of entry eliminates the commitment problem that an incumbent may face in its R&D decision due to the goods? durability. Moreover, a potential entrant over-invests in R&D and an established incumbent might exhibit higher, equal or lower R&D investments in comparison with the social optimum. In our model, the incumbent?s commitment problem and the efficiency of its R&D level are determined by the extent of the network externalities.

Keywords: Network externalities; Durable Goods; Innovation; Imperfect Competition (search for similar items in EconPapers)
JEL-codes: D21 D85 L13 O31 (search for similar items in EconPapers)
Date: 2007
New Economics Papers: this item is included in nep-com, nep-cse, nep-ino, nep-ipr, nep-pr~, nep-mic, nep-net, nep-soc and nep-tid
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:7010

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