Title
Process R&D and product line deletion by a multiproduct monopolist
Document Type
Journal article
Source Publication
Journal of Economics
Publication Date
7-1-2007
Volume
91
Issue
3
First Page
245
Last Page
262
Abstract
Relative to single-product firms, a multiproduct monopolist can internalize the negative externalities of its R&D investments (the "cannibalization effect") in two ways: (1) To lower R&D investment for each product; and (2) To delete some of its product lines so as to enlarge the market size for the remaining lines. It is shown that line deletion is profitable if products are close substitutes. If products are not close substitutes, the multiproduct monopolist keeps all product lines and invests less in cost-reducing R&D than single-product firms engaging in Cournot competition with product differentiation. However, it invests more in R&D than single-product firms if there are significant economies of scope in R&D, or if the oligopolistic firms can cooperate in their R&D decisions.
DOI
10.1007/s00712-007-0260-8
Print ISSN
09318658
E-ISSN
16177134
Publisher Statement
Copyright © Springer-Verlag 2007
Access to external full text or publisher's version may require subscription.
Full-text Version
Publisher’s Version
Language
English
Recommended Citation
Lin, P. (2007). Process R&D and product line deletion by a multiproduct monopolist. Journal of Economics, 91(3), 245-262. doi: 10.1007/s00712-007-0260-8
