Featured Article
Kováč, E., V. Vinogradov, and K. Žigić. “Technological Leadership and Persistence of Monopoly under Endogenous Entry: Static versus Dynamic Analysis.” Journal of Economic Dynamics and Control.
Eugen Kováč, Viatcheslav Vinogradov, and Krešimir Žigić
Received 20 September 2006; revised 11 March 2010; accepted 16 March 2010. Available online 31 March 2010.
Abstract
We build a dynamic oligopoly model with endogenous entry in which a particular firm (leader) invests in an innovation process, facing the subsequent entry of other firms (followers). We identify conditions that make it optimal for the leader in the initial oligopoly situation to undertake pre-emptive R&D investment (strategic predation) eventually resulting in the elimination of all followers. Compared to a static model, the dynamic one provides new insights into the leader's intertemporal investment choice, its optimal decision making, and the dynamics of the market structure over time. We also contrast the leader's investment decisions with those of the social planner.
Keywords: Dynamic oligopoly; Endogenous entry; Persistence of monopoly; Strategic predation; Accommodation
