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Immiserising invention: the private and social returns to R&D under oligopoly

de Meza, David (1986) Immiserising invention: the private and social returns to R&D under oligopoly. International Journal of Industrial Organization, 4 (4). pp. 409-417. ISSN 0167-7187

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Identification Number: 10.1016/0167-7187(86)90013-5

Abstract

A cost-saving invention may so enhance a firm's market power that output price rises. The private return to R&D may then exceed the realised social gain. These possibilities arise when integer constraints are important in determining industry size. If economies of scale are exhausted at sufficiently low outputs for free entry to result in a zero-profit equilibrium, small inventions leave output price unchanged. This mirrors Arrow's perfectly competitive model. But under oligopoly both fixed fees and (possibly negative) royalties are used by an inventor in earning a return which may exceed the potential social gain.

Item Type: Article
Official URL: http://www.elsevier.com/wps/find/journaldescriptio...
Additional Information: © 1986 Elsevier
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HD Industries. Land use. Labor
Sets: Research centres and groups > Managerial Economics and Strategy Group
Departments > Management
Collections > Economists Online
Date Deposited: 06 May 2011 10:44
Last Modified: 06 Jun 2012 17:54
URI: http://eprints.lse.ac.uk/id/eprint/35586

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