WP03/2014
N° Páginas
8
Competitive Pressure and Innovation in Vertically Differentiated Markets
Resumen

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