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Flavio Delbono, Luca Lambertini, Innovation and product market concentration: Schumpeter, arrow, and the inverted U-shape curve, Oxford Economic Papers, Volume 74, Issue 1, January 2022, Pages 297–311, https://doi.org/10.1093/oep/gpaa044
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Abstract
We investigate the relationship between market concentration and industry innovative effort within a familiar two-stage model of R&D race in which firms compete à la Cournot in the product market. With the help of numerical simulations, we show that such a setting is rich enough to generate Arrovian, Schumpeterian, and inverted U curves. We interpret these different patterns on the basis of the relative strength of the technological incentive and the strategic incentive. We then bridge our theoretical results and some recent empirical research.