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Download or read book R&D Incentives, Compatibility and Network Externalities written by Daniel Cerquera and published by . This book was released on 2018 with total page 27 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper analyzes the impact of network externalities on Ramp;D competition between an incumbent and a potential entrant. The analysis shows that the incumbent always invests more than the entrant in the development of higher quality network goods. However, the incumbent exhibits a too low level of investments, while the entrant invests too much in Ramp;D in comparison with the social optimum. In the model entry occurs too often in equilibrium. These inefficiencies are solely due to the presence of network externalities. By choosing compatible network goods, firms do not necessarily reduce the Ramp;D competition intensity.