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Luca Lambertini
''Process R&D in Monopoly under Demand Uncertainty''
( 2006, Vol. 15 No.14 )
I investigate R&D efforts for process innovation in a monopoly with uncertain demand. Two different models are proposed, where either (i) the reservation price is affected by an additive shock and the marginal production cost is increasing, or (ii) a multiplicative shock on the slope of demand combines with a flat marginal production cost. In either case, price-setting behaviour generates a larger R&D investment than quantity-setting behaviour. An Arrovian interpretation of the first result and a Schumpeterian interpretation of the second are proposed.
Keywords: innovation
JEL: O3 - Technological Change; Research and Development: General
L1 - Market Structure, Firm Strategy, and Market Performance: General
Manuscript Received : Dec 27 2006 Manuscript Accepted : Dec 27 2006

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