R&D incentives, compatibility and network externalities

Arbeitspapier

This paper analyzes the impact of network externalities on R&D competition between an incumbent and a potential entrant. The analysis shows that the incumbent always invests more than the entrant in the development of higher quality network goods. However, the incumbent exhibits a too low level of investments, while the entrant invests too much in R&D in comparison with the social optimum. In the model entry occurs too often in equilibrium. These inefficiencies are solely due to the presence of network externalities. By choosing compatible network goods, firms do not necessarily reduce the R&D competition intensity.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ZEW Discussion Papers ; No. 06-093

Classification and Topics

• Classification: Wirtschaft ; Oligopoly and Other Imperfect Markets ; Network Formation and Analysis: Theory ; Firm Behavior: Theory ; Innovation and Invention: Processes and Incentives
• Subject: Network externalities ; Innovation ; Imperfect Competition

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Cerquera Dussán, Daniel
• Event: Veröffentlichung
• (who): Zentrum für Europäische Wirtschaftsforschung (ZEW)
• (where): Mannheim
• (when): 2006

Further information

• Handle: http://hdl.handle.net/10419/24549
• Last update: 10.03.2025, 11:43 AM CET