Oligopolistic Competition, Technology Innovation,
and Multiproduct Firms
Abstract
Oligopolistic Competition, Technology Innovation,
and Multiproduct Firms
Abstract
Firms’ proliferation behavior in a differentiated
product market is studied using an oligopolistic competition model with
multiproduct firms. In contrast to other oligopolistic competition models
with multiproduct firms, the model in this paper has the following characteristics:
(1) the elasticity of substitution across firm's own products and the elasticity
of substitution across different firms are allowed to differ; (2) the product
managers of the same firm behave cooperatively rather than independently;
(3) the number of firms is determined by a free-entry condition and so
is endogenous rather than exogenous. If the elasticity of substitution
across the firm's own products increases, it is shown that the firm proliferates
less and the number of firms in the market increases. On the contrary,
if the elasticity of substitution across different firms increases, firms
proliferate more and the number of firms in the market decreases.
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