Abstract
AbstractThis paper examines a monopolist's innovation efforts for improving product quality and process innovation with reference price effects. Our main results show that the system can achieve saddle‐point steady‐state equilibrium; the two efforts increase with the increase of reference price; although the price is still determined by the monopolist, the price under the social planner regulation is higher than that under the monopolist decision‐making; there is always a negative relationship between the product quality and the price; and memory parameter affects the complementarity (substitutability) relationship between these two efforts.
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