Innovational output and its pricing strategy in the firm level

Summary form only given. To secure the advantage from innovation each firm competitively invests on the R&D program. Moreover price competition take place simultaneously with R&D competition in the market. Accordingly in order to make the success of their R&D to be realized, marketing aspects of innovational output should be considered in the initial stage of R&D. This paper proposes pricing strategy of innovating firms when they have a successful R&D. Interdependent and independent R&D schemes are organized to tackle this problem. In the presence of spillover innovating firms face a tradeoff between incentives to undertake R&D and the costless benefits from rival competitor's innovation. Interdependent R&D can be interpreted as an attempt to internalization of the externality which takes place in that context. The model focuses on pricing of innovational output. This make a difference from other literatures on R&D with spillovers. Defining the spillover and output-sharing rules, a basic model of analysis is developed and demonstrates the analysis on pricing decision for two types of R&D behavior-interdependent and independent R&D.