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Endogenous Transportation Technology in a Cournot Differential Game with Intraindustry Trade

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  • L. Colombo
  • L. Lambertini
  • A. Mantovani

Abstract

We investigate a dynamic Cournot duopoly with intraindustry trade, where firms invest in R&D to reduce the level of iceberg transportation costs. We adopt both open-loop and closed-loop equilibrium concepts, showing that a unique (saddle point) steady state exists in both cases. In the open-loop model, optimal investments and the resulting efficiency of transportation technology are independent of the relative size of the two countries. On the contrary, in the closed-loop case firms' R&D incentives are driven by the relative size of the two countries. Policy implications are also evaluated.

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Bibliographic Info

Paper provided by Dipartimento Scienze Economiche, Universita' di Bologna in its series Working Papers with number 479.

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Date of creation: 2003
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Handle: RePEc:bol:bodewp:479

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  1. Maurice Obstfeld and Kenneth Rogoff., 2000. "The Six Major Puzzles in International Macroeconomics: Is There a Common Cause?," Center for International and Development Economics Research (CIDER) Working Papers C00-112, University of California at Berkeley.
  2. Barbara J. Spencer & James A. Brander, 1983. "International R&D Rivalry and Industrial Strategy," NBER Working Papers 1192, National Bureau of Economic Research, Inc.
  3. Dockner,Engelbert J. & Jorgensen,Steffen & Long,Ngo Van & Sorger,Gerhard, 2000. "Differential Games in Economics and Management Science," Cambridge Books, Cambridge University Press, number 9780521637329, October.
  4. Kevin H. O'Rourke & Jeffrey G. Williamson, 2001. "Globalization and History: The Evolution of a Nineteenth-Century Atlantic Economy," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262650592, December.
  5. James Brander, 1980. "Intra-Industry Trade in Identical Commodities," Working Papers 380, Queen's University, Department of Economics.
  6. James A. Brander & Barbara J. Spencer, 1983. "Strategic Commitment with R&D: The Symmetric Case," Bell Journal of Economics, The RAND Corporation, vol. 14(1), pages 225-235, Spring.
  7. G. Calzolari & L. Lambertini, 2001. "Export Restraints in a Model of Trade with Capital Accumulation," Working Papers 420, Dipartimento Scienze Economiche, Universita' di Bologna.
  8. L. Lambertini & G. Rossini, 2001. "Investment in transport and communication technology in a cournot duopoly with trade," Working Papers 407, Dipartimento Scienze Economiche, Universita' di Bologna.
  9. Reynolds, Stanley S, 1987. "Capacity Investment, Preemption and Commitment in an Infinite Horizon Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 28(1), pages 69-88, February.
  10. James E. Anderson & Douglas Marcouiller, 1999. "Trade, Insecurity, and Home Bias: An Empirical Investigation," NBER Working Papers 7000, National Bureau of Economic Research, Inc.
  11. Alessandro Turrini & Tanguy Van Ypersele, 2002. "Traders, Courts, and the Home Bias Puzzle," Working Papers 0205, University of Bergamo, Department of Economics.
  12. McCallum, John, 1995. "National Borders Matter: Canada-U.S. Regional Trade Patterns," American Economic Review, American Economic Association, vol. 85(3), pages 615-23, June.
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Cited by:
  1. Bacchiega, Emanuele & Randon, Emanuela & Zirulia, Lorenzo, 2012. "Strategic accessibility competition," Research in Economics, Elsevier, vol. 66(2), pages 195-212.
  2. Jannett Highfill & Michael McAsey, 2010. "Firm Metrics with Continuous R&D, Quality Improvement, and Cournot Quantities," International Advances in Economic Research, Springer, vol. 16(3), pages 243-256, August.

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