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Technology Adoption in a Differentiated Duopoly - Cournot versus Bertrand

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  • Rupayan Pal

    (Indira Gandhi Institute of Development Research)

Abstract

This paper compares equilibrium technology adoption in a differentiated duopoly under two alternative modes of product market competition, Cournot and Bertrand. It shows that the cost of technology has differential impact on technology adoption, that is, on cost-efficiency of the industry, under two alternative modes of product market competition. The possibility of ex post cost asymmetry between firms is higher under Bertrand competition than under Cournot competition. If the cost of technology is high, Bertrand competition leads to higher cost-efficiency than Cournot competition provided that the cost reducing effect of the technology is high. On the other hand, if the technology reduces the marginal cost of production by a very low amount, Cournot competition may lead to higher cost-efficiency than Bertrand competition.

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Bibliographic Info

Paper provided by East Asian Bureau of Economic Research in its series Microeconomics Working Papers with number 22388.

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Date of creation: Jan 2009
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Handle: RePEc:eab:microe:22388

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Related research

Keywords: Differentiated duopoly; limit-pricing; price effect; selection effect; technology adoption;

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References

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  1. Piercarlo Zanchettin, 2006. "Differentiated Duopoly with Asymmetric Costs," Journal of Economics & Management Strategy, Wiley Blackwell, Wiley Blackwell, vol. 15(4), pages 999-1015, December.
  2. Bester, Helmut & Petrakis, Emmanuel, 1993. "The incentives for cost reduction in a differentiated industry," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 11(4), pages 519-534.
  3. Bonanno, Giacomo & Haworth, Barry, 1998. "Intensity of competition and the choice between product and process innovation," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 16(4), pages 495-510, July.
  4. Radhika Lahiri & Shyama Ratnasiri, 2006. "Concerning Inequality, Technology Adoption, and Structural Change," School of Economics and Finance Discussion Papers and Working Papers Series, School of Economics and Finance, Queensland University of Technology 207, School of Economics and Finance, Queensland University of Technology.
  5. repec:ebl:ecbull:v:12:y:2005:i:6:p:1-6 is not listed on IDEAS
  6. Khan, A. & Ravikumar, B., 1997. "Costly Technology Adoption and Capital Accumulation," Working Papers, University of Iowa, Department of Economics 97-12, University of Iowa, Department of Economics.
  7. Boone, Jan, 2001. "Intensity of competition and the incentive to innovate," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 19(5), pages 705-726, April.
  8. Aghion, Philippe & Harris, Christopher & Vickers, John, 1997. "Competition and growth with step-by-step innovation: An example," European Economic Review, Elsevier, Elsevier, vol. 41(3-5), pages 771-782, April.
  9. Nirvikar Singh & Xavier Vives, 1984. "Price and Quantity Competition in a Differentiated Duopoly," RAND Journal of Economics, The RAND Corporation, The RAND Corporation, vol. 15(4), pages 546-554, Winter.
  10. Leung, Charles Ka Yui & Tse, Chung Yi, 2001. "Technology Choice and Saving in the Presence of a Fixed Adoption Cost," Review of Development Economics, Wiley Blackwell, Wiley Blackwell, vol. 5(1), pages 40-48, February.
  11. John C. Harsanyi & Reinhard Selten, 1988. "A General Theory of Equilibrium Selection in Games," MIT Press Books, The MIT Press, The MIT Press, edition 1, volume 1, number 0262582384, December.
  12. Amir, Rabah & Jin, Jim Y., 2001. "Cournot and Bertrand equilibria compared: substitutability, complementarity and concavity," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 19(3-4), pages 303-317, March.
  13. Kenneth Arrow, 1962. "Economic Welfare and the Allocation of Resources for Invention," NBER Chapters, National Bureau of Economic Research, Inc, in: The Rate and Direction of Inventive Activity: Economic and Social Factors, pages 609-626 National Bureau of Economic Research, Inc.
  14. Jensen, Richard, 1992. "Innovation Adoption and Welfare under Uncertainty," Journal of Industrial Economics, Wiley Blackwell, Wiley Blackwell, vol. 40(2), pages 173-80, June.
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Cited by:
  1. Rupayan Pal, 2009. "Delegation and Emission Tax in a Differentiated Oligopoly," Governance Working Papers, East Asian Bureau of Economic Research 22935, East Asian Bureau of Economic Research.
  2. Trishita Bhattacharjee & Rupayan Pal, 2013. "Price vs. Quantity in duopoly with strategic delegation: Role of network externalities," Indira Gandhi Institute of Development Research, Mumbai Working Papers, Indira Gandhi Institute of Development Research, Mumbai, India 2013-010, Indira Gandhi Institute of Development Research, Mumbai, India.

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