The paper addresses the question how production capacities on an established market affect the innovativeness of firms. We analyze the strategic interactions in an oligopoly setting where firms offer an established product and have the option to offer an additional new product. We show that the...

In this paper we are studying the question under which circumstances a firm with a first-mover advantage may get leapfrogged by a follower. At the market stage we assume a Stackelberg structure, i.e. the leader commits to a quantity and the follower then reacts to it. It is well-known that the...

We analyze a duopoly where capacity-constrained firms offer an established product and have the option to offer an additional new and differentiated product. We show that the firm with the smaller capacity on the established market has a higher incentive to innovate and reaches a larger market...