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Welfare Analysis of Cournot and Bertrand Competition With(out) Investment in R & D

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  • Tondji, Jean-Baptiste

Abstract

I consider the model of a differentiated duopoly with process R&D when goods are either substitute, complements or independent. I propose a non-cooperative two-stage game with two firms producing differentiated goods. In the first stage, firms decide their technologies and in the second stage, they compete in quantities or prices. I evaluate the social welfare within a framework of Cournot and Bertrand competition models with or without investment in research and development. I prove that the Cournot price can be lower than Bertrand price when the R&D technology is relatively inefficient; thus, Cournot market structure can generate larger consumer's surplus and welfare.

Suggested Citation

  • Tondji, Jean-Baptiste, 2016. "Welfare Analysis of Cournot and Bertrand Competition With(out) Investment in R & D," MPRA Paper 75806, University Library of Munich, Germany, revised 24 Dec 2016.
    • Handle: RePEc:pra:mprapa:75806
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    R&D; Cournot duopoly; Bertrand model; Welfare.;
    All these keywords.

    JEL classification:

    • D60 - Microeconomics - - Welfare Economics - - - General
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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