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Market Competition, R&D And Firm Profits In Asymmetric Oligopoly

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  • JUNICHIRO ISHIDA
  • TOSHIHIRO MATSUMURA
  • NORIAKI MATSUSHIMA

Abstract

We investigate a Cournot model with strategic R&D investments wherein efficient low-cost firms compete against less efficient high-cost firms. We find that an increase in the number of high-cost firms can stimulate R&D by the low-cost firms, while it always reduces R&D by the high-cost firms. More importantly, this force can be strong enough to compensate for the loss that arises from more intense market competition: the low-cost firms' profits may indeed increase with the number of high-cost firms. An implication of this result is far-reaching, as it gives low-cost firms an incentive to help, rather than harm, high-cost competitors. We relate this implication to a practice known as open knowledge disclosure, especially Ford's strategy of disclosing its know-how publicly and extensively at the beginning of the 20th century.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal The Journal of Industrial Economics.

Volume (Year): 59 (2011)
Issue (Month): 3 (09)
Pages: 484-505

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Handle: RePEc:bla:jindec:v:59:y:2011:i:3:p:484-505

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Citations

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Cited by:
  1. Hiroaki Ino & Toshihiro Matsumura, 2013. "Asymmetric welfare implication between a small number of leaders and a small number of followers in Stackelberg models," Discussion Paper Series 098, School of Economics, Kwansei Gakuin University, revised Jan 2013.
  2. Takauchi, Kazuhiro, 2012. "International R&D Rivalry with a Shipping Firm," MPRA Paper 36843, University Library of Munich, Germany.
  3. Fanti, Luciano & Meccheri, Nicola, 2014. "Profits and competition under alternative technologies in a unionized duopoly with product differentiation," Research in Economics, Elsevier, vol. 68(2), pages 157-168.
  4. Kazuhiro Takauchi, 2011. "Rules of origin and international R&D rivalry," Economics Bulletin, AccessEcon, vol. 31(3), pages 2319-2332.
  5. repec:kgu:wpaper:98 is not listed on IDEAS
  6. Toshihiro Matsumura & Noriaki Matsushima, 2013. "Should firms employ personalized pricing?," ISER Discussion Paper 0869, Institute of Social and Economic Research, Osaka University.
  7. Mizuno, Keizo, 2013. "Managerial incentives and endogenous coalition formation with externalities," Mathematical Social Sciences, Elsevier, vol. 66(1), pages 33-43.
  8. Konishi, Hideo & Yurtseven, Çaglar, 2014. "Market share regulation?," Japan and the World Economy, Elsevier, vol. 29(C), pages 36-45.
  9. Matsushima, Noriaki & Mizuno, Tomomichi, 2012. "Profit-enhancing competitive pressure in vertically related industries," Journal of the Japanese and International Economies, Elsevier, vol. 26(1), pages 142-152.
  10. Hideo Konishi & Çaglar Yurtseven, 2013. "Market Share Regulation?," Boston College Working Papers in Economics 847, Boston College Department of Economics.

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