R&D for quality improvement and network externalities

Lambertini, Luca ; Raimondello, Orsini (2004) R&D for quality improvement and network externalities. p. 16. DOI 10.6092/unibo/amsacta/1554.
Full text available as:
[img]
Preview
PDF
Download (155kB) | Preview

Abstract

We investigate the bearings of network externalities on product quality im- provements requiring costly R&D investments. The model considers the dynamic behaviour of a monopolist alternatively maximising profits or social welfare. On the one hand, we confirm much of the acquired wisdom from the static literature on the same topic, about the arising of quality undersupply at the private optimum. On the other, we identify the initial conditions that must be met for R&D activity to be observed under profit-seeking behaviour. We also show that the presence of network externalities affects the optimal behaviour of the profit-seeking firm but not that of a benevolent planner, who serves all consumers and smooths the R&D costs leading to a steady state quality which is independent of network concerns.

Abstract
Document type
Monograph (Working Paper)
Creators
CreatorsAffiliationORCID
Lambertini, Luca
Raimondello, Orsini
Keywords
monopoly, network externality, product quality
Subjects
DOI
Deposit date
15 Feb 2006
Last modified
17 Feb 2016 14:33
URI

Other metadata

Downloads

Downloads

Staff only: View the document

^