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Market Structure and Competition Policy
Stricter competition policy reduces expected payo¤s before and after innovation, but reduces pre-innovation payo¤s relatively more than postinnovation payo¤s, and therefore increases the equilibrium level of R&D activity: tough product-market competition policy stimulates innovation. There is an inverted-U relationship between competition policy and expected welfare. The model also permits analysis of the e¤ect of R&D spillovers and of alternative R&D cooperation regimes on expected welfare, ondoi:10.1017/cbo9780511492570.010 fatcat:pannhl5do5h5fgvci6fdvybvdm