Process and product R&D by a multiproduct monopolist
Oxford Economic Papers
It is shown that the claim in Lambertini that a multiproduct monopolist's incentive for process R&D declines with the number of products it offers is incorrect. This incentive is in fact an increasing function of the number of products in his model. I further extend the model of Lambertini to show that whether or not process R&D incentive and the number of varieties are positively related depends on the degree of scope economies in process R&D. Product innovation promotes process R&D if the degree of such scope economies is high (as in Lambertini), and discourages it if the degree of scope economies is low.
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Lin, P. (2004). Process and product R&D by a multiproduct monopolist. Oxford Economic Papers, 56(4), 735-743. doi: 10.1093/oep/gpf065