Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

A Member of the Law Professor Blogs Network

Thursday, April 23, 2009

Persistence of Monopoly and Research Specialization

Posted by D. Daniel Sokol

Philipp Weinschenk (Max Planck Institute for Collective Goods) explains the Persistence of Monopoly and Research Specialization.

ABSTRACT: We examine the persistence of monopolies in markets with innovations when the outcome of research is uncertain. We show that for low success probabilities of research, the incumbent can seldom preempt the potential entrant. Then the efficiency effect outweighs the replacement effect. It is vice versa for high probabilities. Moreover, the incumbent specializes in “safe” research and the potential entrant in “risky” research. We also show that the probability of entry has an inverted U-shape in the success probability. Since even at the peak entry is rather unlikely, the persistence of the monopoly is high.

http://lawprofessors.typepad.com/antitrustprof_blog/2009/04/persistence-of-monopoly-and-research-specialization.html

| Permalink

TrackBack URL for this entry:

http://www.typepad.com/services/trackback/6a00d8341bfae553ef0115702b3509970b

Listed below are links to weblogs that reference Persistence of Monopoly and Research Specialization:

Comments

Post a comment