"Product innovation, sell-off, and entry deterrence"
JEL codes: L1
Abstract: This paper compares the incentive of a monopolist to engage in product innovation with and without the threat of entry. The paper shows that there may be greater or lesser incentive to innovate when faced with the threat of entry. The fear that product innovation may lead to entry, which can only be forestalled by engaging in sell-off, may make an incumbent less likely to engage in product innovation. On the other hand, the incumbent may have extra incentive to engage in product innovation and sell-off in order to deter entry.