We examine a vertically differentiated duopoly where firms invest in process and product innovation and then compete in prices under full market coverage. We show that (i) process innovation fosters (hinders) product innovation for the low-quality (high-quality) firm; (ii) the firm which is initially more efficient invests more than the rival in process innovation; (iii) if the initial differential between marginal costs is sufficiently high, the demand for the less efficient firm is nil and the duopoly equilibrium does not exist.

Process and Product Innovation in a Vertically Differentiated Industry

BACCHIEGA, EMANUELE;LAMBERTINI, LUCA;MANTOVANI, ANDREA
2011

Abstract

We examine a vertically differentiated duopoly where firms invest in process and product innovation and then compete in prices under full market coverage. We show that (i) process innovation fosters (hinders) product innovation for the low-quality (high-quality) firm; (ii) the firm which is initially more efficient invests more than the rival in process innovation; (iii) if the initial differential between marginal costs is sufficiently high, the demand for the less efficient firm is nil and the duopoly equilibrium does not exist.
E. Bacchiega; L. Lambertini; A. Mantovani
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Utilizza questo identificativo per citare o creare un link a questo documento: http://hdl.handle.net/11585/107667
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