Competitive pressure and innovation in vertically differentiated markets
Authors
Pedro Mendi
Type
Article
Publisher
Economics Bulletin Vol. 35 Issue 4
Pages
2309-2316
Date
01-11-2015

This paper analyzes the innovation incentives for a firm that produces a vertically differentiated product, in the presence of a competitive fringe that produces a lower-quality product. I find that the relationship between innovation incentives and competition, measured by the difference in quality levels may exhibit an inverted-U-shaped pattern.

Article.