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Welfare Analysis of Cournot and Bertrand Competition With(out) Investment in R & D
Welfare Analysis of Cournot and Bertrand Competition With(out) Investment in R & D
I consider the model of a differentiated duopoly with process R&D when goods are either substitute, complements or independent. I propose a non-cooperative two-stage game with two firms producing differentiated goods. In the first stage, firms decide their technologies and in the second stage, they compete in quantities or prices. I evaluate the social welfare within a framework of Cournot and Bertrand competition models with or without investment in research and development. I prove that the Cournot price can be lower than Bertrand price when the R&D technology is relatively inefficient; thus, Cournot market structure can generate larger consumer's surplus and welfare.
- LUDWIG-MAXIMILIANS-UNIVERSITAET MUENCHEN Germany
- University of Ottawa Canada
- University of Ottawa
- Université Laval Canada
- Department of Economics Switzerland
L13 - Oligopoly and Other Imperfect Markets, O32 - Management of Technological Innovation and R&D, D60 - General
L13 - Oligopoly and Other Imperfect Markets, O32 - Management of Technological Innovation and R&D, D60 - General
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[1] Arghya, G. and Manipushpak, M., 2008,`Comparing Bertrand and Cournot Outcomes in The Presence of Public Firms', Working paper, 16.
[2] Cheng, L., 1985, `Comparing Bertrand and Cournot equilibria: a geometric approach', Rand Journal of Economics, 16, pp. 146-152.
[3] Delbono, F. and Denicolo, V., 1990, `R & D Investment In a Symmetric And Homogeneous Oligopoly, Bertrand vs Cournot', International Journal of Industrial Organization, 8, pp. 297-313.
[4] Hackner, J., 2000, `A Note on Price and Quantity Competition in Di erentiated Oligopolies', Journal of Economic Theory, 93, pp. 233-239. [OpenAIRE]
[5] Hsu, J. and Wang, X. H., 2005, `On Welfare under Cournot and Bertrand Competition in Di erentiated Oligopolies', Review of Industrial Organization, 27, pp. 185-191.
[6] Kabiraj, T. and Roy, S., 2002, `Cournot and Bertrand Prices In A Model Of Di erentiated Duopoly With R and D', Working paper.
[7] Motta, M., 1993, `Endogenous Quality Choice Price vs Quantity Competition', The Journal of Industrial Economics, 41, 2, pp. 113-131.
[8] Okuguchi, K.,1987, `Equilibrium Prices in the Bertrand and Cournot Oligopolies', Journal of Economic Theory, 42, pp. 128-139. [OpenAIRE]
[9] Qiu, L. D., 1997, `On the dynamic e ciency of Bertrand and Cournot equilibria', Journal of Economic Theory, 75, pp. 213-229.
[10] Singh, N. and X. Vives, 1994, `Price and quantity competition in a di erentiated duopoly', Rand Journal of Economics , 15, pp. 546-554.
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citations This is an alternative to the "Influence" indicator, which also reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).0 popularity This indicator reflects the "current" impact/attention (the "hype") of an article in the research community at large, based on the underlying citation network.Average influence This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).Average impulse This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network.Average citations This is an alternative to the "Influence" indicator, which also reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).0 popularity This indicator reflects the "current" impact/attention (the "hype") of an article in the research community at large, based on the underlying citation network.Average influence This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).Average impulse This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network.Average
Citations provided by BIP!Popularity provided by BIP!- LUDWIG-MAXIMILIANS-UNIVERSITAET MUENCHEN Germany
- University of Ottawa Canada
- University of Ottawa
- Université Laval Canada
- Department of Economics Switzerland
- Departement of Economics United States
- Department of Economics Indonesia
- Department of Economics University of Ottawa Canada
- University of Ottawa (Université dOttawa) Canada
I consider the model of a differentiated duopoly with process R&D when goods are either substitute, complements or independent. I propose a non-cooperative two-stage game with two firms producing differentiated goods. In the first stage, firms decide their technologies and in the second stage, they compete in quantities or prices. I evaluate the social welfare within a framework of Cournot and Bertrand competition models with or without investment in research and development. I prove that the Cournot price can be lower than Bertrand price when the R&D technology is relatively inefficient; thus, Cournot market structure can generate larger consumer's surplus and welfare.