TY - JOUR
T1 - Schumpeterian competition in experimental markets
AU - Isaac, R. Mark
AU - Reynolds, Stanley S.
N1 - Funding Information:
*The financial support of the National Science Foundation (grant SES-8606770) and the Alfred P. Sloan Foundation is gratefully acknowledged. The paper has benefited greatly from the presentation of early results to seminars at the University of Iowa, the University of Houston, and Texas A&M University. David Nickerson and participants at an Econometric Society session of the 1987 winter meetings also provided useful comments. Two anonymous referees provided useful suggestions which improved the paper. All data are available from the authors upon request.
PY - 1992/1
Y1 - 1992/1
N2 - We report on a series of laboratory experiments that capture key elements of research and development (R&D) rivalry. The experimental environment has a small number of sellers who compete in terms of pricing and production decisions and in terms of cost-reducing R&D. Rewards for innovation depend on the profitability of product market competition. The experiments capture a kind of dynamic, Schumpeterian competition. There is a sharp contrast in experimental results between monopolies and four-seller (competitive) markets. Aggregate R&D is higher under competition than under monopoly and prices follow marginal cost reductions much more quickly under competition than under monopoly. The paper examines market performance in the experiments and the sources of market performance problems.
AB - We report on a series of laboratory experiments that capture key elements of research and development (R&D) rivalry. The experimental environment has a small number of sellers who compete in terms of pricing and production decisions and in terms of cost-reducing R&D. Rewards for innovation depend on the profitability of product market competition. The experiments capture a kind of dynamic, Schumpeterian competition. There is a sharp contrast in experimental results between monopolies and four-seller (competitive) markets. Aggregate R&D is higher under competition than under monopoly and prices follow marginal cost reductions much more quickly under competition than under monopoly. The paper examines market performance in the experiments and the sources of market performance problems.
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U2 - 10.1016/0167-2681(92)90079-Q
DO - 10.1016/0167-2681(92)90079-Q
M3 - Article
AN - SCOPUS:38249015140
VL - 17
SP - 59
EP - 100
JO - Journal of Economic Behavior and Organization
JF - Journal of Economic Behavior and Organization
SN - 0167-2681
IS - 1
ER -