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| Author: | Pepall, L. |
| Title: | Imitative competition and product innovation in a duopoly model |
| Journal: | Economica
1997 : MAY, VOL. 64:254, p. 265-279 |
| Index terms: | COMPETITION INNOVATION NEW PRODUCTS DUOPOLY MODELS |
| Language: | eng |
| Abstract: | This study investigates the problem of imitative competition and it's effects on wellfare, by using a vertically differentiated model of sequential strategic product choice. The key assumption is that the sunk entry cost of the imitative firm is lower the closer the imitators product is to the originator's. Close imitation also intensifies price competition. In wealthier markets the late entrant's incentive to imitate is stronger. If the innovator cannot under a tight patent policy or under cooperative alliance enter with the late entrant rival, it may be deterred from entering new product markets. Consumers differ by income, and the degree of consumer heterogeneity in the market affects the trade-off between imitation and differentation. |
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