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Innovation with Market Concentration and Consumer Income in Dynamic Markets

Mei L., Yurko A.
Переводчик: W. Andrew.

Our study examines the disruptive innovations that arrive from outside of the industry through computational analyses that conne ct innovation rate to market concentration and consumer income in a dynamic setting. The findings show that a market of fewer incumbents (higher concentration) generates less innovations due to the reduced innovation premium and shortened length of incumbency; however, the equilibrium innovation rate incr eases in the market share of the top firm, due to enhanced innovation premiu m. We also find that more high-income consumers stimulate innovation. Lastly, higher consumer welfare and aggregate welfare are found in a more innovative ma rket in the long term.