What is private value of innovation to the innovating firm

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Consider an oligopoly with n Cournot competing firms. Market demand is linear, p = a - bQ (where Q is total output), and the firms initially have symmetric marginal cost, ch . Suppose one firm can innovate and obtain a patent that allows it to compete with the others firms at a lower
marginal cost, cl . Assume that the innovation is nondrastic. What is the private value of innovation to the innovating firm? What if the innovation were drastic so that the innovating firm exists as a monopoly after the innovation?

Reference no: EM13874551

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