Competition and Innovation: An Experimental Investigation

Donja Darai (), Dario Sacco () and Armin Schmutzler

No 608, SOI - Working Papers from Socioeconomic Institute - University of Zurich

Abstract: The paper analyzes the effects of more intense competition on firms'incentives to invest in process innovations. We carry out experiments for two-stage games, where R&D investment choices are followed by product market competition. As predicted by theory, an increase in the number of firms from two to four reduces investments. However, a positive effect is observed for a switch from Cournot to Bertrand, even though theory predicts a negative effect in the four-player case. This result reflects overinvestment in the Bertrand case. The results arise both in treatments in which both stages are implemented and in treatments in which only one stage is implemented.

Keywords: R&D investment; intensity of competition; experiment (search for similar items in EconPapers)
JEL-codes: C92 L13 O31 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2009-06, Revised 2007-04
New Economics Papers: this item is included in nep-com, nep-exp, nep-ino and nep-mic
References: Add references at CitEc
Citations: View citations in EconPapers (15)

Forthcoming in Experimental Economics

Downloads: (external link)
https://www.zora.uzh.ch/id/eprint/52368/1/wp0608.pdf revised version, 2009 (application/pdf)

Related works:
Journal Article: Competition and innovation: an experimental investigation (2010)
Working Paper: Competition and Innovation: An Experimental Investigation (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:soz:wpaper:0608

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