The Relationship between Market Structure and Innovation in Industry Equilibrium: A Case Study of the Global Automobile Industry

• 成果类型: Article
• 署名作者: Hashmi, Aamir Rafique; Van Biesebroeck, Johannes
• 署名单位: National University of Singapore; KU Leuven
• 刊物名称: REVIEW OF ECONOMICS AND STATISTICS
• ISSN/ISSBN: 0034-6535
• DOI: 10.1162/REST_a_00494
• 发表日期: 2016-03
• 页码: 192-208
• 关键词: product differentiation; DYNAMICS; COMPETITION; demand; models; CHOICE

摘要

We specify and estimate a dynamic game to study the equilibrium relationship between market structure and innovation in the automobile industry. The quality of each firm's product for the average consumer, the key state variable, is modeled as stochastically increasing in innovation, the dynamic control, which is proxied by patent applications. Equilibrium innovation is a function of market structure, the vector of quality levels of all active firms, and the cost of R&D. Our main findings are as follows: (a) optimal innovation has an inverted-U shape in own quality; (b) holding own quality constant, innovation is declining in average rival quality but increasing in quality dispersion; and (c) following entry, each incumbent's innovation declines, but aggregate innovation increases in most market structures. These findings are broadly consistent with the Schumpeterian hypothesis that market power leads to more innovation.