This paper analyses the relationship between past innovation output, competition, and future innovation input in a … dynamic econometric setting. We distinguish two dimensions of competition that correspond to the concepts of product … substitutability and entry barriers due to fixed costs. Based on firm-level panel data for Germany and Switzerland we obtain consistent …

of competition on prices and profits are non-monotonic in the degree of inertia. Further, a model that omits consumer … inertia tends to overstate the marginal effect of competition on price, relative to a benchmark that accounts for consumer …