The impact of competition on unilateral incentives to innovate

We investigate the impact of the degree of competition in a Cournot market on one firm's unilateral incentives to invest in R&D. Applying comparative static analyses we get different predictions depending on the magnitude of the innovation efficiency parameter alpha. Even inner solutions arose. For alpha->1 the comparative statics predicate that incentives to invest in R&D are strongest in a monopoly whereas for smaller alpha the optimal market structure for unilateral innovation varies depending on the cost level.innovation incentives; market structure; Cournot competition

Bad luck vs. self-inflicted neediness – An experimental investigation of gift giving in a solidarity game

We experimentally examine the impact of self-inflicted neediness on the solidarity behavior of subjects. In one treatment in our solidarity experiment all subjects face the same probability of becoming needy, in the other treatment subjects have the choice between a secure payment and a lottery including a certain probability of becoming needy. Then we ask all subjects how much they will give to losers in their group thus investigating if people are willing to give the same gifts whether or not subjects are responsible for inequality in payoffs. We found evidence for allocative as well as for procedural utility concerns.solidarity game, self-inflicted neediness, responsibility, procedural utility

Patents versus Subsidies - A Laboratory Experiment

This paper studies the effects of patents and subsidies on R&D investment decisions. The theoretical framework is a two-stage game consisting of an investment and a market stage. In equilibrium, both patents and subsidies induce the same amount of R&D investment, which is higher than the investment without governmental incentives. In the first stage, the firms can invest in a stochastic R&D project which might lead to a reduction of the marginal production costs and in the second stage, the firms face price competition. Both stages of the game are implemented in a laboratory experiment and the obtained results support the theoretical predictions. Patents and subsidies increase investment in R&D and the observed amounts of investment in the patent and subsidy treatment do not differ significantly across both instruments. However, we observe overinvestment in all three treatments. Observed prices in the market stage converge to equilibrium price levels