We develop a general equilibrium model of vertical innovation in which multiple firms compete monopolistically in the quality space. The model features many firms, each of which holds the monopoly to produce a unique quality level of an otherwise homogenous good, and consumers who are...

We develop a general equilibrium model of vertical innovation in which multiple firms compete monopolistically in the quality space. The model features many firms, each of which holds the monopoly to produce a unique quality level of an otherwise homogenous good, and consumers who are...

We develop a model of vertical innovation in which firms incur a market entry cost and choose a unique level of quality. Once established, firms compete for market shares, selling to consumers with heterogeneous tastes for quality. The equilibrium of the pricing game exists and is unique within...