TY - UNPB
T1 - Strategic choice between process and product innovation under different competitive regimes
AU - Filippini, Luigi
AU - Martini, Gianmaria
PY - 2009
Y1 - 2009
N2 - This paper investigates the strategic choice between introducing a process
or a product innovation in a duopoly model with vertical differentiation,
comparing the outcomes in case of Bertrand and Cournot competition. It
is shown that under both competitive regimes three equilibria in innova-
tion adoption may arise: two symmetric equilibria, where firms select the
same innovation type, and one asymmetric equilibrium. The competitive
regime has an impact on the features of the asymmetric equilibrium, since
in case of Bertrand competition, the high (low) quality firm chooses a prod-
uct (process) innovation, while firms make the opposite choices in case of
Cournot competition. The presence of a leapfrogging effect (only in the
Cournot case) explains these different outcomes. Last, we find that the
Cournot competitors tend to favor the introduction of a new product in
comparison with the Bertrand competitors.
AB - This paper investigates the strategic choice between introducing a process
or a product innovation in a duopoly model with vertical differentiation,
comparing the outcomes in case of Bertrand and Cournot competition. It
is shown that under both competitive regimes three equilibria in innova-
tion adoption may arise: two symmetric equilibria, where firms select the
same innovation type, and one asymmetric equilibrium. The competitive
regime has an impact on the features of the asymmetric equilibrium, since
in case of Bertrand competition, the high (low) quality firm chooses a prod-
uct (process) innovation, while firms make the opposite choices in case of
Cournot competition. The presence of a leapfrogging effect (only in the
Cournot case) explains these different outcomes. Last, we find that the
Cournot competitors tend to favor the introduction of a new product in
comparison with the Bertrand competitors.
KW - competitive regime
KW - innovation adoption
KW - process & product innovation
KW - vertical differentiation
KW - competitive regime
KW - innovation adoption
KW - process & product innovation
KW - vertical differentiation
UR - http://hdl.handle.net/10807/1886
M3 - Working paper
BT - Strategic choice between process and product innovation under different competitive regimes
PB - Università Cattolica del Sacro Cuore
ER -