Resource title

R&D incentives, compatibility and network externalities

Resource image

image for OpenScout resource :: R&D incentives, compatibility and network externalities

Resource description

This paper analyzes the impact of network externalities on R&D competition between an incumbent and a potential entrant. The analysis shows that the incumbent always invests more than the entrant in the development of higher quality network goods. However, the incumbent exhibits a too low level of investments, while the entrant invests too much in R&D in comparison with the social optimum. In the model entry occurs too often in equilibrium. These inefficiencies are solely due to the presence of network externalities. By choosing compatible network goods, firms do not necessarily reduce the R&D competition intensity.

Resource author

Daniel Cerquera Dussán

Resource publisher

Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/24549

Resource license

Adapt according to the presented license agreement and reference the original author.