Comparing Cournot and Bertrand Equilibria in a Differentiated Duopoly with Product R&D
AbstractThis paper compares Bertrand and Cournot equilibria in a differentiated duopoly with substitute goods and product R&D. I find that R&D expenditure, prices and firms� net profits are always higher under quantity competition than under price competition. Furthermore, output, consumer surplus and total welfare are higher in the Bertrand equilibrium than in the Cournot equilibrium if either R&D spillovers are weak or products are sufficiently differentiated. If R&D spillovers are strong and products are not too differentiated, then output, consumer surplus and total welfare are lower in the Bertrand case than in the Cournot case. Thus a key finding of the paper is that there are circumstances where quantity competition can be more beneficial than price competition both for consumers and for firms.
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Bibliographic InfoPaper provided by University of Essex, Department of Economics in its series Economics Discussion Papers with number 539.
Date of creation: 10 May 2002
Date of revision:
Postal: Discussion Papers Administrator, Department of Economics, University of Essex, Wivenhoe Park, Colchester CO4 3SQ, U.K.
Other versions of this item:
- Symeonidis, George, 2003. "Comparing Cournot and Bertrand equilibria in a differentiated duopoly with product R&D," International Journal of Industrial Organization, Elsevier, vol. 21(1), pages 39-55, January.
- NEP-ALL-2002-06-13 (All new papers)
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