Competition and Product Cycles with Non-Diversifiable Risk

Palokangas T (2006). Competition and Product Cycles with Non-Diversifiable Risk. IIASA Interim Report. IIASA, Laxenburg, Austria: IR-06-027

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Abstract

This paper analyzes the growth effects of competition in a product-cycle model where R&D firms both innovate and imitate and households are subject to non-diversifiable risk. I prove that product market competition promotes growth when the initial level of competition is high enough. In contrast to the earlier product-cycle models with diversifiable risk, I show also the following. Some positive profits are necessary for technological change. The larger the proportion of industries subject to price competition, the slower economic growth.

Item Type: Monograph (IIASA Interim Report)
Research Programs: Dynamic Systems (DYN)
Depositing User: IIASA Import
Date Deposited: 15 Jan 2016 08:39
Last Modified: 21 Oct 2016 12:50
URI: http://pure.iiasa.ac.at/8070

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