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Product Innovation and Transport Technology in a Cournot Duopoly

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Author Info
Andrea Mantovani () (Università degli Studi di Bologna)

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Abstract

We consider a two-stage Cournot duopoly game with horizontally differentiated products where firms decide whether to improve transport technology or to activate product innovation. Transport technology increases the quantity sold in the market, while product innovation reduces product substitutability. We find that firms tend to invest in the relatively more efficient activity but there exists intervals characterized by (i) prisoner's dilemma; (ii) chicken game; (iii) coordination game. Of particular interest is that firms tend to avoid product innovation, even if a commitment by both firms in this direction would yield the highest aggregate profit.

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File URL: http://www.rivistapoliticaeconomica.it/2007/lug-ago/mantovani.php
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Publisher Info
Article provided by SIPI Spa in its journal Rivista di Politica Economica.

Volume (Year): 97 (2007)
Issue (Month): 4 (July-August)
Pages: 145-170
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Handle: RePEc:rpo:ripoec:v:97:y:2007:i:4:p:145-170

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Find related papers by JEL classification:
D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
O31 - Economic Development, Technological Change, and Growth - - Technological Change - - - Innovation and Invention: Processes and Incentives

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