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Product and Process R&D under Asymmetric Demands

Author

Listed:
  • Yi-Jie Wang
  • Kung-Cheng Andy Wang
  • Wen-Jung Liang
  • Bo-Yi Lee

Abstract

We develop a two-market model with asymmetric demands to examine the optimal product and process R&D under Bertrand and Cournot competition. We show that when the big market is sufficiently large and the cost parameter of product R&D is small or when the market is symmetric and the marginal disutility rate is high, the Cournot aggregate product R&D is greater than that under Bertrand competition. Next, when the big market is not sufficiently large and the cost parameter of product R&D is small, the Bertrand aggregate process R&D is greater than that under Cournot competition if the marginal disutility rate is low.

Suggested Citation

  • Yi-Jie Wang & Kung-Cheng Andy Wang & Wen-Jung Liang & Bo-Yi Lee, 2019. "Product and Process R&D under Asymmetric Demands," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 175(3), pages 537-557.
    • Handle: RePEc:mhr:jinste:urn:doi:10.1628/jite-2018-0015
    DOI: 10.1628/jite-2018-0015
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    More about this item

    Keywords

    product R&D; process R&D; two-market model; Bertrand competition; Cournot competition;
    All these keywords.

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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