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Complementaries and commitment in a Cournot setting

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  • Manel Antelo

    (Universidade de Santiago de Compostela)

Abstract

When oligopolistic firms compete by investing simultaneously in cost-reducing R&D and in demand-creating advertising expenditures, their strategic commitment in such assets may differ qualitatively from the behavior pursued when only one of them is used. In particular, if R&D (and advertising) investment is decided on and made public before selecting the output, then cases of undercommitment in cost reduction can arise despite the non-existence of technological spillovers; and others in which there is no room for a differentiated strategic use of R\&D. Furthermore, when advertising is included among the investment variables of firms, their R&D expenses may equal or even exceed the socially optimal level.

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Bibliographic Info

Article provided by El Colegio de México, Centro de Estudios Económicos in its journal Estudios Económicos.

Volume (Year): 17 (2002)
Issue (Month): 1 ()
Pages: 3-36

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Handle: RePEc:emx:esteco:v:17:y:2002:i:1:p:3-36

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Web page: http://www.colmex.mx/centros/cee/
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  1. d'ASPREMONT, Claude & JACQUEMIN, Alexis, . "Cooperative and noncooperative R&D in duopoly with spillovers," CORE Discussion Papers RP -823, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  2. Slade, Margaret E, 1995. "Product Rivalry with Multiple Strategic Weapons: An Analysis of Price and Advertising Competition," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 4(3), pages 445-76, Fall.
  3. Gasmi, Farid & Laffont, Jean-Jacques & Vuong, Quang, 1992. "Econometric Analysis of Collusive Behavior in a Soft Drink Market," IDEI Working Papers 16, Institut d'Économie Industrielle (IDEI), Toulouse.
  4. Dixit, Avinash, 1979. "The Role of Investment in Entry-Deterrence," The Warwick Economics Research Paper Series (TWERPS) 140, University of Warwick, Department of Economics.
  5. Fudenberg, Drew & Tirole, Jean, 1984. "The Fat-Cat Effect, the Puppy-Dog Ploy, and the Lean and Hungry Look," American Economic Review, American Economic Association, vol. 74(2), pages 361-66, May.
  6. Ware, Roger, 1984. "Sunk Costs and Strategic Commitment: A Proposed Three-Stage Equilibrium," Economic Journal, Royal Economic Society, vol. 94(374), pages 370-78, June.
  7. Mark J. Roberts & Larry Samuelson, 1988. "An Empirical Analysis of Dynamic, Nonprice Competition in an Oligopolistic Industry," RAND Journal of Economics, The RAND Corporation, vol. 19(2), pages 200-220, Summer.
  8. Henriques, Irene, 1990. "Cooperative and Noncooperative R&D in Duopoly with Spillovers: Comment," American Economic Review, American Economic Association, vol. 80(3), pages 638-40, June.
  9. Spence, A Michael, 1980. "Notes on Advertising, Economies of Scale, and Entry Barriers," The Quarterly Journal of Economics, MIT Press, vol. 95(3), pages 493-507, November.
  10. Barbara J. Spencer & James A. Brander, 1982. "Strategic Commitment with R&D: The Symmetric Case," Working Papers 516, Queen's University, Department of Economics.
  11. Bulow, Jeremy I & Geanakoplos, John D & Klemperer, Paul D, 1985. "Multimarket Oligopoly: Strategic Substitutes and Complements," Journal of Political Economy, University of Chicago Press, vol. 93(3), pages 488-511, June.
  12. Fershtman, Chaim, 1984. "Goodwill and Market Shares in Oligopoly," Economica, London School of Economics and Political Science, vol. 51(23), pages 271-81, August.
  13. De Bondt, Raymond & Veugelers, Reinhilde, 1991. "Strategic investment with spillovers," European Journal of Political Economy, Elsevier, vol. 7(3), pages 345-366, October.
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