Duopoly innovation with monopoly debater

Abstract

Purpose -This paper highlights the interaction between innovation and financial structure under duopoly with a monopoly debater.Design/methodology/approach -By game-theory approaches, we characterize effects of debt levels on innovative investment with limited liability effect.Findings -This paper argues that higher debt levels increase both innovative investment and output. Both higher debt rate and higher debt levels act as commitment to reduce opponent firms' net profits. Net profit for unit debt is reduced with higher debt level and higher debt rate.Originality/value -This study extends Brander and Lewis's (1986) to innovative situation and no interior point solution is restricted.

Effects of Switching Costs on Innovative Investment

“…This paper closely relates to innovation literature. For innovative investment, this study refers to the interesting papers of Sacco and Schmutzler (2011), Chen, Nie, and Wang (2015), Nie and Chen (2012), Nie (2014), Chen, Nie and Huang (2017), Chen, Nie, and Wen (2015b), Nie, Yang, Chen, and Wang (2016), Nie (2018), Chen and Sappington (2010), Yang, Nie, Liu, and Shen (2018), Nie, Wang, Chen, and Chen (2018), Chen, Wen, Wang, and Nie (2017) and Vives (2008). Chen and Sappington (2010) argue that vertical integration (VI) generally enhances innovation under downstream Cournot competition.…”