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Product Quality and Market Structure

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  • Takeo Nakao

Abstract

This article studies the relationship between the level of product quality and the structure of an industry under fully dynamic conditions, in which innovations are assumed to take place successively. We extend the Nerlove-Arrow-Gould model of advertising behavior of a monopolist to the R&D activity of oligopolists under the Cournot-type assumption and the limited joint profit-maximization hypothesis. The comparative static results show that an increase in the number of oligopolists lowers the pace of improvements in the industry's average product quality. But within the context of our model there is no definite relationship between the number of oligopolists and the R&D expenditure-sales ratio.

Suggested Citation

  • Takeo Nakao, 1982. "Product Quality and Market Structure," Bell Journal of Economics, The RAND Corporation, vol. 13(1), pages 133-142, Spring.
  • Handle: RePEc:rje:bellje:v:13:y:1982:i:spring:p:133-142
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    Cited by:

    1. Belderbos, Rene & Carree, Martin & Diederen, Bert & Lokshin, Boris & Veugelers, Reinhilde, 2004. "Heterogeneity in R&D cooperation strategies," International Journal of Industrial Organization, Elsevier, vol. 22(8-9), pages 1237-1263, November.
    2. De Bondt, Raymond, 1997. "Spillovers and innovative activities," International Journal of Industrial Organization, Elsevier, vol. 15(1), pages 1-28, February.
    3. Leonard Cheng, 1984. "International trade and technology: A brief survey of the recent literature," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 120(1), pages 165-189, March.

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