Announcing High Prices to Deter Innovation

• 成果类型: Article
• 署名作者: Marshall, Guillermo; Parra, Alvaro
• 署名单位: University of British Columbia
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2020.3642
• 发表日期: 2021
• 页码: 2448-2465
• 关键词: Arrow's replacement effect; innovation deterrence; Product market competition; price announcements

摘要

Price announcements-similar to the ones made by tech firms at media events-are effective in deterring innovation. By announcing (and setting) a high price, a firm increases its rivals' short-run profits, reducing the rival firms' incentives to innovate by magnifying their Arrow's replacement effect. We show that the equilibrium prices are greater and research and development (R&D) investments lower relative to when price announcements cannot be used strategically. We call this the R&D deterrence effect of price and show that it induces equilibrium prices that may exceed the multiproduct monopoly prices and even dissipate the consumer benefits of innovation.