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Technology adoption in a differentiated duopoly: Cournot versus bertrand

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Author Info
Rupayan Pal () (Indira Gandhi Institute of Development Research)

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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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Paper provided by Indira Gandhi Institute of Development Research, Mumbai, India in its series Indira Gandhi Institute of Development Research, Mumbai Working Papers with number 2009-001.

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Length: 21 pages
Date of creation: Jan 2009
Date of revision:
Handle: RePEc:ind:igiwpp:2009-001

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

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Find related papers by JEL classification:
L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
O31 - Economic Development, Technological Change, and Growth - - Technological Change - - - Innovation and Invention: Processes and Incentives
D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection

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  1. Bonanno, Giacomo & Haworth, Barry, 1998. "Intensity of competition and the choice between product and process innovation," International Journal of Industrial Organization, Elsevier, vol. 16(4), pages 495-510, July. [Downloadable!] (restricted)
  2. Boone, Jan, 2001. "Intensity of competition and the incentive to innovate," International Journal of Industrial Organization, Elsevier, vol. 19(5), pages 705-726, April. [Downloadable!] (restricted)
  3. Kenneth Arrow, 1962. "Economic Welfare and the Allocation of Resources for Invention," NBER Chapters, in: The Rate and Direction of Inventive Activity: Economic and Social Factors, pages 609-626 National Bureau of Economic Research, Inc. [Downloadable!]
  4. Ming Hsin Lin & Hikaru Ogawa, 2005. "Cost reducing incentives in a mixed duopoly market," Economics Bulletin, Economics Bulletin, vol. 12(6), pages 1-6. [Downloadable!]
  5. Amir, Rabah & Jin, Jim Y., 2001. "Cournot and Bertrand equilibria compared: substitutability, complementarity and concavity," International Journal of Industrial Organization, Elsevier, vol. 19(3-4), pages 303-317, March. [Downloadable!] (restricted)
  6. Aghion, Philippe & Harris, Christopher & Vickers, John, 1997. "Competition and growth with step-by-step innovation: An example," European Economic Review, Elsevier, vol. 41(3-5), pages 771-782, April. [Downloadable!] (restricted)
  7. Bester, Helmut & Petrakis, Emmanuel, 1993. "The incentives for cost reduction in a differentiated industry," International Journal of Industrial Organization, Elsevier, vol. 11(4), pages 519-534. [Downloadable!] (restricted)
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