Dynamic R&D Incentives with Network Externalities

Abstract

This dissertation analyzes the impact of network externalities on R&D competition in an oligopolistic industry. It focuses on the level of R&D investments, the social efficiency of those efforts and the role of networks compatibility. The analysis is taken under different specifications and assumptions to check the robustness of the results. It is concluded that network externalities provide an important incentive to invest in R&D but this incentive is inefficient from a social welfare point of view. These R&D investments represent a powerful mechanism to deter entry, avoid commitment problems, improve market position and affect consumers' expectations in network markets.Network Externalities; Innovation; Dynamic Games; Durable Goods