Abstract
In this paper, we investigate monopolist optimal investment levels using a dynamic model under knowledge accumulation. We show that (i) investment decisions in product and process innovation are independent of each other; (ii) under both the monopolist and the social optimum, there exist the saddle stable steady state equilibria; (iii) Optimal investment levels in product and process innovation positive response to learning rate and knowledge accumulation rate, inversely response to knowledge depreciation rate.
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