MARKET STRUCTURE AND FIRMS' R&D BEHAVIOR

THE RELATIONSHIP BETWEEN MARKET STRUCTURE AND AN INDUSTRY'S R & D ACTIVITIES IS A PART OF THE LARGER QUESTION OF THE FACTORS UNDERLYING FIRMS' R & D ACTIVITIES. WITH RESPECT TO THE CONTROVERSY AS TO THE INCENTIVE TO INVENT UNDER MONOPOLISTIC AS COMPARED TO COMPETITIVE CIRCUMSTANCES, THE IMPLICIT ASSUMPTION THAT INVENTION ITSELF IS MONOPOLIZED IS OFTEN OVERLOOKED, AND THERE IS FAILURE TO TAKE ACCOUNT OF THE INTERDEPENDENCE WHICH EXISTS BETWEEN FIRMS' OUTPUT AND R & D DECISIONS. A COMPREHENSIVE ANALYTICAL FRAMEWORK IS DEVELOPED WHICH SHOWS THE NATURE OF THE RELATIONSHIP BETWEEN FIRMS' OUTPUT AND R & D DECISIONS AND THE MULTIDIMENSIONAL NATURE OF THE EXPECTATIONS REGARDING RIVALS' REACTIONS WHICH ARE RELEVANT IN DETERMINING R & D BEHAVIOR. APPENDIX.