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Jeremy Jay Jackson and Jason Smith
''A framework for non-drastic innovation with product differentiation''
( 2015, Vol. 35 No.1 )
We model non-drastic technological innovation in a duopoly model with differentiated products. We derive profit functions for both firms which depend on only one variable, the technological gap. As our model derives product demands directly from agent utility we are able to fully describe the welfare effects of innovation. We show that the welfare improvements from innovation come not only as firms accrue higher profits, by charging consumers higher prices, but also as consumers enjoy higher quality products.
Keywords: non-drastic innovation, product differentiation
JEL: L2 - Firm Objectives, Organization, and Behavior: General
O3 - Technological Change; Research and Development: General
Manuscript Received : Mar 11 2015 Manuscript Accepted : Mar 11 2015

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