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Endogenous transportation technology in a Cournot differential game with intraindustry trade

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

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.

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Article provided by Elsevier in its journal Japan and the World Economy.

Volume (Year): 21 (2009)
Issue (Month): 2 (March)
Pages: 133-139

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Handle: RePEc:eee:japwor:v:21:y:2009:i:2:p:133-139
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505557

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  12. Knick Harley, C., 1980. "Transportation, the world wheat trade, and the Kuznets Cycle, 1850-1913," Explorations in Economic History, Elsevier, vol. 17(3), pages 218-250, July.
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  15. Dockner,Engelbert J. & Jorgensen,Steffen & Long,Ngo Van & Sorger,Gerhard, 2000. "Differential Games in Economics and Management Science," Cambridge Books, Cambridge University Press, number 9780521637329, Junio.
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