Market Structure and Schumpeterian Growth

Posted: 21 Apr 2004 Last revised: 15 Feb 2015

See all articles by Val E. Lambson

Val E. Lambson

Brigham Young University - Department of Economics

Kerk Phillips

Brigham Young University - Department of Economics; Government of the United States of America - Congressional Budget Office (CBO)

Date Written: April 2004

Abstract

We present a discrete-time version of an otherwise standard Schumpeterian growth model. Discrete time exhibits two important differences from continuous time. First, the probability of successful innovation cannot be homogeneous of degree one in inputs. A natural R&D analogue to constant returns to scale implies a Poisson production function with diminishing marginal product of inputs. Second, R&D firms sometimes innovate simultaneously. The resulting market conduct is critical. We consider both Bertrand competition and collusion among successful innovators.

Surprisingly, the industry demand for R&D inputs does not depend on the number of firms in the R&D sector if Bertrand competition ensues following ties. In contrast, demand for R&D inputs is higher if ties are expected to result in collusion. In general equilibrium, Bertrand competition leads to random switching between monopoly and competitive production. Under collusion, production is always at the monopoly level, but there is faster growth. Numerical simulations suggest that this also leads to higher welfare.

Keywords: Growth, market structure

JEL Classification: L11, O31, O40

Suggested Citation

Lambson, Val Eugene and Phillips, Kerk L and Phillips, Kerk L, Market Structure and Schumpeterian Growth (April 2004). Journal of Economic Behavior and Organization, Vol. 62, No. 1, 2007, Available at SSRN: https://ssrn.com/abstract=534043 or http://dx.doi.org/10.2139/ssrn.534043

Val Eugene Lambson

Brigham Young University - Department of Economics ( email )

130 Faculty Office Bldg.
Provo, UT 84602-2363
United States
801-378-7765 (Phone)

Kerk L Phillips (Contact Author)

Government of the United States of America - Congressional Budget Office (CBO) ( email )

Ford House Office Building
2nd & D Streets, SW
Washington, DC 20515-6925
United States

Brigham Young University - Department of Economics ( email )

166 Faculty Office Bldg.
Provo, UT 84602-2363
United States
801-422-5928 (Phone)

HOME PAGE: http://sites.google.com/site/kerkphillips

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
846
PlumX Metrics