Innovation and Entry Deterrence in an Open Access Network
msra(2004)
摘要
Systemic innovations play a crucial role for the development and efficiency of network industries. This paper centers on the incentives of an incumbent to innovate. Two problems are highlighted: Entrants may benefit from systemic innovations without sharing the burden of innovation costs; at the same time, systemic innovations often raise entrants’ costs, resulting in a lower probability of entry. The simultaneous existence of these two aspects allows the incumbent to tailor his innovation strategically by combining productive and distortionary efforts. Using a stylized model, the paper analyses the incumbent’s strategic choice and its effect on social welfare. It is shown that even from a social point of view distortionary efforts are sometimes indispensable to compensate for the potential free-riding of entrants. Moreover, regulatory policies and the influence of other network users, not competing with the incumbent, are studied. JEL–classification numbers: L14, L97, O31.
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关键词
networks,entry deterrence,technology choice.,innovation incentives
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