Monopolistic competition/or the market with heterogeneous firms

摘要

I study monopolistic competition in patent races where firms are heterogeneous in R&D costs. Only the most efficient firms invest, and they invest more when the value of innovation is higher, while the endogenous set of active firms depends on the profitability of innovation. In particular, selection effects (increasing R&D productivity) emerge after a reduction of the entry cost or after an increase (a reduction) of the value of innovation if the elasticity of the probability of innovation is increasing (decreasing) in investment. (C) 2019 Elsevier B.V. All rights reserved.