A Schumpeterian theory of multi-quality firms

Abstract : This paper introduces multi-quality firms within a Schumpeterian framework. Featuring non-homothetic preferences and income disparities in an otherwise standard quality-ladder model, it shows that the resulting differences in the willingness to pay for quality among consumers generate both positive investments in R&D by industry leaders and positive market shares for more than one quality, hence allowing for the emergence of multi-product firms within a vertical innovation framework. This positive investment in R&D by incumbents is obtained with complete equal treatment in the R&D field between the incumbent patent holder and the challengers: in this framework, the incentive for a leader to invest in R&D stems from a “surplus appropriation effect” specific to vertically-differentiated markets, i.e. the perspective of more efficient price discrimination when expanding the product portfolio. Such a framework makes it possible to analyse the impact of income distribution, as well as that of several possible R&D policies, both on long-term growth and on the allocation of R&D activities between challengers and incumbents.
Type de document :
Article dans une revue
Journal of Economic Theory, Elsevier, 2018, 175, pp.766-802. 〈10.1016/j.jet.2018.03.005〉
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Contributeur : Hélène Latzer <>
Soumis le : lundi 16 avril 2018 - 09:24:01
Dernière modification le : vendredi 27 juillet 2018 - 15:00:37

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Hélène Latzer. A Schumpeterian theory of multi-quality firms. Journal of Economic Theory, Elsevier, 2018, 175, pp.766-802. 〈10.1016/j.jet.2018.03.005〉. 〈hal-01767265〉



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