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?