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One Smart AgentMicroeconomic Theory eJournal
- Publisher
- Wiley
- Copyright
- Copyright © 2000 Wiley Subscription Services, Inc., A Wiley Company
- ISSN
- 1058-6407
- eISSN
- 1530-9134
- DOI
- 10.1111/j.1430-9134.2000.00053.x
- Publisher site
- See Article on Publisher Site
Abstract
This paper examines the effect of the intensity of short‐run price competition and other exogenous variables that affect gross profit margins—such as the degree of product differentiation and the consumers' responsiveness to quality—on market structure and on advertising and R&D expenditure. A key result is that more intense short‐run competition can lead to lower concentration in industries with high advertising or R&D intensity, unlike exogenous‐sunk‐cost industries. Also, price competition has a negative effect on advertising or R&D expenditure. A case study is also presented, which is consistent with the theoretical results of the paper.
Journal
Journal of Economics & Management Strategy – Wiley
Published: Mar 1, 2000