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Product and process innovation with knowledge accumulation in monopoly: A dynamic analysis
- Zhong, Genyuan, Zhang, Weihang
- Economics letters 2018 v.163 pp. 175-178
- dynamic models, learning, monopoly
- In this paper, we investigate monopolist optimal investment levels using a dynamic model under knowledge accumulation. We show that (i) investment decisions in product and process innovation are independent of each other; (ii) under both the monopolist and the social optimum, there exist the saddle stable steady state equilibria; (iii) Optimal investment levels in product and process innovation positive response to learning rate and knowledge accumulation rate, inversely response to knowledge depreciation rate.