[We analyze a dynamic model of repeated innovation where inventors may be acquired by an incumbent or else challenge its leadership. In the short run, acquisitions always spur innovation because of the invention-for-buyout effect. In the long-run, however, acquisitions may stifle innovation...

We offer a new explanation of equilibrium rationing. As is well known, a monopolist selling a durable good and not able to commit to a price sequence has an incentive to lower the price once the consumers with the greatest willingness to pay have bought, but this induces consumers to postpone...