Abstract
Does monopoly persist in a dynamic industry with opportunities for technological innovations? This paper points out that the persistence of monopoly under uncertain innovations depends on how R&D competition is modeled. If the incumbent and the entrant bid for a stochastic R&D technology in an auction framework as in Gilbert and Newbery ( American Economic Review, 1982, 72, 514–526) before engaging in R&D competition as in Reinganum ( American Economic Review, 1983, 73, 741–748), then the incumbent monopolist wins the auction with probability one both for drastic and nondrastic innovations.
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