MONOPOLY INNOVATION WITH EXHAUSTIBLE RESOURCE AND LABOR INPUT

This paper focuses on the propensity to innovate for a monopolist with two inputs, an exhaustible resource and labor. When this exhaustible resource is used up, the monopolist quits this industry. This paper characterizes the relationship between the two types of elasticity of innovation. With this relationship, the equilibrium is captured. This study argues that the lower the marginal cost incurred by innovation, the longer it takes for the monopolist to quit the industry and the higher the profits.