2009•인하대학교 정석물류통상연구원 학술대회Requires access
Process and product innovarions in vertically differentiated markets with network externalities
Mingqing Xing, Lai‐Sheng Wang, Ruiting Zhang
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Abstract
We analyze product and process innovations in a vertically differentiated duopoly in market with externalities. Through assuming process innovation reduces marginal cost and product innovation improves product quality, we find that;(i) product and process innovations are complements (resp.substitutes) for the firm with low (resp. high) quality when the intensity of network externality is small; (ii) process innovation affects product innovation more intensely when exists network externality than not;(iii) network externality makes process RD(iv) aggregate process RD (v) the firm with higher initial efficiency invests more in process innovation and will obtain more demand and profit than the rival in equilibrium.