The oligopoly market and the R&D expenditure

Abstract

The firms in the oligopoly market, producing substitutable commodities, are committed to strong competition. Measuring the competitiveness degree by the substitution degree of commodities represents the way to describe how the firms in the oligopoly market choose the level of expenditure for research and development. The paper will prove how the competitiveness level among firms influences the innovation level. The relation between innovation and competitiveness is not linear. The firms in the oligopoly market can spend excessively for R&D when competition is intense; otherwise, the level of R&D expenditure can record even decreases.