The impact of competition on unilateral incentives to innovate

Abstract

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