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Endogenous transportation technology in a Cournot differential game with intraindustry trade

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  • Colombo, Luca
  • Lambertini, Luca
  • Mantovani, Andrea

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.

Suggested Citation

  • Colombo, Luca & Lambertini, Luca & Mantovani, Andrea, 2009. "Endogenous transportation technology in a Cournot differential game with intraindustry trade," Japan and the World Economy, Elsevier, vol. 21(2), pages 133-139, March.
  • Handle: RePEc:eee:japwor:v:21:y:2009:i:2:p:133-139
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    1. repec:kap:iaecre:v:16:y:2010:i:3:p:243-256 is not listed on IDEAS
    2. Jannett Highfill & Michael McAsey, 2010. "Firm Metrics with Continuous R&D, Quality Improvement, and Cournot Quantities," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 16(3), pages 243-256, August.
    3. Bacchiega, Emanuele & Randon, Emanuela & Zirulia, Lorenzo, 2012. "Strategic accessibility competition," Research in Economics, Elsevier, vol. 66(2), pages 195-212.

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