How does a firm’s market power in existing products affect its incentives to innovate? We explore this fundamental … their innovation activities in response to the potential entry of direct competitors. We then examine a legal ruling that … firms increased their net innovation activities in response to competitive entry. These effects center on firms with …

products and brand-name reputation. The effects of new products on the private incentives to innovate are investigated on the …

What is the best way to reward innovation? While prizes avoid deadweight loss, intellectual property selects high … social surplus projects. Optimal innovation policy thus trades off the ex-ante screening benefit and the ex-post distortion … and market size of the innovation. The appropriate degree of market power is never full monopoly pricing and is determined …