Quantitative Policy Analysis of Innovation Activities: Application to Dynamic Structural Estimation

This paper estimates a dynamic oligopoly model of product innovation and proposes an approach to evaluate an equilibrium effect of public policy on firm's innovation activities. The model considers a multi-agent Markov-Perfect Nash Equilibrium, allowing for firm's dynamic decision making on innovation activities, and its entry and exit. The estimation results obtained by use of Japanese firm-level data on product innovation identify net positive spillovers among firms' dynamic innovation activities.