Technical Progress in the Relationship between Competition and Investment

This paper investigates the impact of technical progress on the relationship between competition an investment. The competition is measured as the degree of substitutability and technical progress enlarges the size of innovation in cost reduction. In a context of duopoly, technical progress raises investment of the industry and tends to reduce the degree of substitutability that maximizes investment. Five examples illustrate this feature and highlight the fact that technical progress is not neutral with respect to the relationship between competition and investment